Pay off credit card

Question: Out of the clear blue sky, I got a notice that my Capital One Platinum credit card rate is being raised from 4.99% to 13.99. I have a very high balance on this card (76% of available credit). I checked my own credit records (perfect, never late, all accounts up to date) and score (942) and figured they would want to negotiate with me, but no dice. The guy on the phone said they mailed out 8 million of these notices this week. My options are 1. Find a 0% introductory rate and transfer the balance (if I can even get one) or 2. Opt out of the change in the rate, close the account, and pay it off at 4.99%. Either way paying it all the way down will take me 12-18 months. What is the best alternative or is there another option that you would recommend? Katryn, Minneapolis, MN.

Answer: What the credit card companies are doing is legal. But it's wrong. That said, the best thing you could do is keep the 4.9% rate, close the account and payoff the debt. It's risky to carry a high balance in an economy sinking lower every day and it's prudent to eliminate credit card debt. So, unless there is some business reason why you need this particular piece of plastic, I'd get rid of it--and fast. Capital One loses a good customer, too. That's the power consumers have in our economy. I'm hoping after the shoddy way most credit card companies have treated their customers during the downturn everyone will refuse to carry a balance, slashing card company profits and practicing good personal finance habits.

About the author

Chris Farrell is the economics editor of Marketplace Money.

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