Is it Time to Break up with your Credit Card?
The credit card news, as of late, has been anything but positive. The government is tightening the reigns the credit card industry who, in turn, is scrambling to switch up the rules of their credit cards before the new credit card bill takes place. And who is left in the middle of this mess? That’s right: you, the consumer.
All of this mess can make any consumer think twice about even having credit cards anymore. But is the solution to simply cut up your credit cards and live without them?
Although it would make sense that credit cards sometimes hurt credit, most of the time they help credit. In other words, cutting up your credit cards and ending your relationship may not be the best idea, in terms of your credit score.
A Cash-Only Life?
If you plan on living on cash alone for the rest of your life then perhaps ending your relationship with credit cards can work. However, if you plan on financing a vehicle, purchasing a home or refinancing your current mortgage, your credit card relationship is crucial.
This is because credit cards help you establish a strong credit history which, in turn, helps to boost your credit score. Without credit cards, your credit history can be brief, thereby hurting your credit score and your chances of securing any type of financing.
And, given, the state of the current economy and credit sector, a strong credit score is king. Without it, you can all but forget about securing a home loan, vehicle loan or personal loan.
With that said, there are a few things you can do to make your relationship with your credit card company run a bit more smoothly, even in these uncertain economical times:
- If you received notice from your credit card company that your interest rate has been raised, immediately contact your credit card company and request that they cancel the card. They will undoubtedly ask why, thereby giving you a chance to ask if they can lower your interest rate.
- If your creditor refuses to lower your interest rate, you may want to look for another card with a lower interest rate onto which you can transfer your balance. Beware, though, of the balance transfer fees and promotional interest rates, both of which can end up costing you in the long run.
- If you don’t have the option of transferring your balance, the new credit card law allows you to “opt out” of your higher interest rate credit card. If you cancel the card, the creditor must allow you pay off the balance at your current interest rate.
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