Yeah, they don't like it when you don't carry a balance because they only make money on the interest you pay.

I had a card that I stopped using after awhile. They wanted me to use it so they kept sending me balance transfer offers and purchase checks. I finally decided to use it to help pay off a higher balance card. They promptly sent me a notice that they were raising my interest rate to 34% (yes, you heard right) because of a "sudden large increase in activity" on it.

34% wow that card would be shredded and sent back

imnuts wrote:

mnemonicj wrote: Does a debit card count as a credit card? No, banks pay the debit processing fee, so it should be the same as a cash transaction.

Close, these are the fees to retailers for credit / debit card processing.

Visa / Mastercard - 1.7 - 1.9% of transaction
American Express - 2.5-3% of transaction
Debit Card - 6 or 7 cents flat rate per transaction

phileysmiley wrote:

Yeah, they don't like it when you don't carry a balance because they only make money on the interest you pay. I had a card that I stopped using after awhile. They wanted me to use it so they kept sending me balance transfer offers and purchase checks. I finally decided to use it to help pay off a higher balance card. They promptly sent me a notice that they were raising my interest rate to 34% (yes, you heard right) because of a "sudden large increase in activity" on it.

You could have probably called and canceled that card and kept the lower interest rate until you paid it off because it was an not an agreed change to your account, unless it was stated in the fine print.

mnemonicj wrote:

phileysmiley wrote: Yeah, they don't like it when you don't carry a balance because they only make money on the interest you pay. I had a card that I stopped using after awhile. They wanted me to use it so they kept sending me balance transfer offers and purchase checks. I finally decided to use it to help pay off a higher balance card. They promptly sent me a notice that they were raising my interest rate to 34% (yes, you heard right) because of a "sudden large increase in activity" on it. You could have probably called and canceled that card and kept the lower interest rate until you paid it off because it was an not an agreed change to your account, unless it was stated in the fine print.

I had one do the same to me recently (Citi). They honored the transfer rate (like 2.9%), but my regular rate went up to like 24% (from 11.9%). Had I had even a small balance on the card, I'd have been paying out the arse for it.

For those that don't know... CC's will take any balances you have on the card and put your payment toward whichever has the lower interest rate. So if you have balances of:
$600 at 14%
$300 at 18%
and $2000 at 2.99%

They will put the bulk of your payment towards the $2000 and only a fraction towards the other smaller amounts at the higher interest. Thus you end up often paying as much interest on the smaller balances as you do on the much larger one. And they never go away bc your payment is always put towards the lowest interest rate. It's a royal PITA

So if you DO transfer a balance, make sure the card has no existing balance and that you don't plan to use the card until you pay off the transferred balance at the lower rate. Normally you can call them a few months after you pay off the card and ask them to lower your rate again. If they don't, tell them you've got another card and want to cancel. 9/10 they'll drop your rate.

mnemonicj wrote:

phileysmiley wrote: Yeah, they don't like it when you don't carry a balance because they only make money on the interest you pay. I had a card that I stopped using after awhile. They wanted me to use it so they kept sending me balance transfer offers and purchase checks. I finally decided to use it to help pay off a higher balance card. They promptly sent me a notice that they were raising my interest rate to 34% (yes, you heard right) because of a "sudden large increase in activity" on it. You could have probably called and canceled that card and kept the lower interest rate until you paid it off because it was an not an agreed change to your account, unless it was stated in the fine print.

Yes, they told me that in a nice big box. BUT you know that if you pay off a card and CANCEL it, your credit rating DROPS. Anytime you have a closed account, for whatever reason, it negatively affects your credit rating. So closing the account was not an option. The best I could do was pay it off but leave it open. Then I just won't use it.

That's a good point. A lot of folks do cancel their cards in mass before applying for a loan, and it does HURT them. If you are going to cancel, let the card site idle for a while and then cancel it. Or, if you know you won't need the credit for the next 12-16 months, you probably can cancel them all at once.

I canceled a ton of mine after college knowing I wouldn't need them. My score dropped like I expected, but a year later when we applied for a new home and car loan - no problems. In fact, my score was better by that time bc my ability to use "available credit" was lower. Loan agencies will take into consideration how much credit you COULD use - and that can hurt you if you have 9 credit cards with $5000 limits. If you went crazy one day, well... they worry about that. LOL. Fewer cards is ultimately better than many.