Does anyone know...paying down CC

[Heluvsme]

I am a regular reader at Credit Boards and on another web site that has a Budget Board, and there has been talk that I'm not sure I understand, and that I definitely have not heard of before----

Others have said that when they make large payments toward a high balance on their credit cards, they sometimes get adverse reactions from the companies (which makes sense...the CC companies want their interest and are in the business of making money)....but things like: A woman paid down her $11,000 cc balance with a $5,000 payment. A couple months later, she received a letter from Chase, that CC company, that said '...due to her continuing high balances, they were reducing her credit lines and upping her interest rates...' She wrote that she doesn't care about her credit limit, but the higher interest rate was uncalled for. She's currently disputing it, but still......

Has anyone heard of negative consequences regarding paying down their balances? Don't get me wrong....in the long run it's our goal to never have CC's, but while those balances are being paid off, it sure could sidestep a person's efforts.



And .....one other question if you can stand it from me.... I've heard that paying off credit cards and then closing the accounts can actually LOWER your overall score. What's a person to do? Pay down the account and leave it open? I've heard about the risk of overextending and I can see that, but still, who wants an account open once it's paid off?

Clear as mud??
Thanks to anyone who can clear up my fuzzy mind.

[della92]

I haven't heard anything about paying large amounts early, my guess would be that it is just the credit card company realizing they may not earn the interest they expected and then to offset with an increased interest rate. Most credit cards have fine print that states they can raise the interest rate at their own will.

As far as closing a paid account, I have heard that it is recommended that you don't close the account, the supposed reason is that the credit rating companies find a person that has access to large amounts of credit, however, does not use it, is more desirable, thus the better credit rating. But, then there is always the worry about identity and credit theft. Chances are if you haven't used a particular card in a long time and someone gains access to it, it will take that much longer to realize that it has been used by someone else.

[DJ1972]

i heard a report the other day that said chase was increasing the interest on a lot of people for no reason at all..the news said that since the companies are losing money in the housing marker they are making up for it by increasing interest rates on cc's.

[patticakes]

A few years ago I encountered clients being reported on their credit reports as "Not paid as agreed" when they paid more than than the minimum payment. These people were applying for a mortgage had to write a simple letter explaining why it wasn't paid as agreed -- they want to pay off their debt. Then they have to go to the department store to ask to have that corrected on their credit report. It was just a royal pain in the keister!

I have not had this as an issue since then,

patti

[JanieD]

There is a post under News You Can Use titled The Credit Card Party Is Over from yesterday that links to an article that talks about this very issue. Found the article very interesting.

[Squirt]

I've heard that Bank of America has been pulling this shenanigan. Not as a result of making a large payment, but just as a means of making more money off of their customers. They do come with an agreement that says you can call and disagree with the increase, but that means you can accrue no more credit with them. They allow you to pay off your balance at your current rate. Gee- how nice of them!

And yes, closing a credit card can negatively affect you credit score as it decreases the total amount of available credit you have. Part of your credit score is the ratio of credit used to available credit. This will make your percentage of credit used higher than before. Also, if you have had this card for any serious length of time, closing it can affect the length of your credit history with open accounts.