Expert: Regan Shinski - 10/21/2009

Question
QUESTION: I have 2 credit cards, a visa and mastercard. The Mastercard is with Chase and I just got notice from them that the APR will now be a "variable" rate...the 'prime rate' plus 16.99% which right now would be over 20% according to them. I usually pay my bill in full every month so it's not a big issue except for those times I do need to pay something off, like a Dr. bill or car repair. But I have 2 questions please. Do you know if this is a trend and other banks will be going to a 'variable' APR? And, I've had this card for 20 years and don't even remember how I got it, if I want to close my account with them and get another Mastercard at a more reasonable rate, where should I go?  Thanks

ANSWER: Hello Lee:

There is no question it is the trend.  There are a lot of reasons not the least of them is simply the poor economy.  More people are defaulting, so lenders are raising fees and rates to cover the write-offs.  There are also finalizing their portfolios as the new credit card law comes into play.

The issue of finding credit cards can be completed through basic internet searches.  www.creditcards.com also has listings of cards by type.  I would NOT apply through their site because it can potentially generate multiple inquiries than can harm your credit score.  Find a card you are interested in through that site or through searches, then apply directly with the lender on their website.

Also, I would give serious consideration to NOT closing your existing account.  Closing a card you have had for twenty years will likely have a negative impact on your credit score.  Potentially a SIGNIFICANT negative impact on your score.  The age of your credit accounts is a MAJOR factor in your credit score.  It's your decision, but I think it's much, much better credit wise to just use it a few times a year and pay it in full for those months.

Good luck, I hope this helps.

Regan
mbscompany@aim.com

---------- FOLLOW-UP ----------

QUESTION: Ok, thanks. I mentioned I have a Mastercard and a Visa card.  Even though the Visa card looks just like a credit card, it is considered a "check card" and is through my bank- whenever I charge something on it, usually small amounts, my checking account is debited (it took the place of me having to write checks years ago). Is this card considered to be an actual credit card? But more importantly, does my use of this card, and the small purchases I make with it, help or play a part in contributing to my credit rating even though it's used as a check card?

Answer
No.  That is a "debit" or "check" card as you mentioned.  These are typically not reported to the credit bureaus.  The only exception is if you use it, the account goes negative, you don't pay it, and it is then turned over to a collection agency which WILL report the derogatory account.

You should also be advised that you typically have less fraud protection with a debit card than you do with an actual credit card.  Not always, but certainly most of the time.

Thanks,
Regan