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Q: Why would my credit card APR increase? Should I just close the account?
A: Any financial decision, whether it is closing a credit card account or something else, is and should be a personal one. Only you know your financial situation inside and out; therefore, you are the only one really qualified to make such a decision.
However, when it comes to closing out a credit card, for any reason, including an increase in your annual percentage rate (APR), you should know that doing so may affect your credit score. This can occur for at least two reasons, and there may be more.
1. Your credit score is based in part on your credit age; that is, how long you have had certain accounts. If you have several older accounts, your credit score can actually be higher than if you have several newer (recently opened) accounts. So, if you’ve had your credit card for many years, you might want to take this into consideration, as closing the account may cause your score to drop.
2. Your credit score is also affected by how much available credit you have. In other words, how much more money could you borrow, or how much more credit do you have on your credit cards? If it looks like you’re reaching the limit (which closing out an account can do), this could cause your score to drop.
Even if you’re not going to use the card because of the increase in the APR, it may still be safe to leave that account open.