Kimberly Lankford from Kiplinger recently handled a question from a reader. Capital One raised her interest rate from 9.9% to 15.9% on her account, and she’s wondering what her options are.
You could decline the rate change and continue to pay off your balance at the old rate… Capital One would then close your account and notify the three credit bureaus when you finished paying off the balance…
Kimberly explains that closing the account can be detrimental to her credit score, especially if this is one of her longest standing credit card accounts. Closing the account could negatively affect the reader’s total credit history, average credit history, and debt utilization ratio. The optimal solution is to pay off the balance as quickly as possible but leave the account open and inactive.
Even before taking any of the above actions, I would suggest simply calling Capital One and asking if they could lower the rate. In the past, this has been somewhat effective for some people, but the credit landscape has changed and the companies seem to be more likely not to budge. It’s worth a try, in my opinion. I wouldn’t even give up until I’ve talked to several different customer service representatives and their supervisors.
In March, a Consumerism Commentary had a similar question about closing her Capital One credit card. I provided my suggestion based on Capital One’s method of reporting credit limits to the bureaus that provide credit reports and scores at the time. This method was designed to hurt customers’ credit scores. In that case, her Capital One card was the oldest account, but I didn’t rule out canceling the card because of those reporting practices. The company has since switched gears and has adjusted their policy to report true credit limits.
Coping With Credit-Card Rate Increases [Kiplinger]
Updated July 28, 2014 and originally published November 17, 2007.