Should we tranfer balance and cancel CC?

sweets98

I have been with my DH for ten years now. When I met him, I was still living at home and he had been on his own for a bit, just long enough to destroy his credit (not a LOT but just enough)! LOL We had DS a year later (not planned) and have worked on building our family and then started trying to fix his credit situation. We have paid back hs debt and are now trying to rebuild his credit. The last thing we really wanted was to deal with credit cards because of their reputation but we've found that we had to go that route to show positive credit on his record so we can eventually work on loans and getting house of our own down the road.

DH had trouble getting credit cards, of course but we found the Orchard Bank credit card with a $300 limit to start with. We got it in April. His interest rate was not low at all (18%) but we made small purchases and have paid $50 each month instead of just the low $15/month rate. His rate has come down a few points in the last few months. YEAH!

The credit card offers have been coming in the mail left and right but we have stayed away. MIL told DH that the card he wants is the Capital One No Hassle one. Those offers started to come and over the months, the interest rate has gotten lower and lower...down to 12% and so he finally jumped on it.

The question is.....would it be smart to tranfer the balance to the Capital One card from the Orchard Bank and cancel the Orchard Bank card? Or should be pay off the Orchard Bank ($100) and cancel? We've only had the Orchard Bank card since April, will that look bad? I have no clue what we should do! I know we don't want to have a bunch of cards that we're not using and we certainly do not want to max out our cards or anything.

Thanks!

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dreamgarden

Do you pay an annual fee on the Orchard Bank card? If not, I'd go ahead and transfer the balance to the other card, but keep the OB card account open.

Use it every once in awhile to keep it active. NOT closing it will actually improve your credit history.

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clg7067

Capital One is also not my friend, as they offered me a great deal on a credit card a while back and then sent me something entirely different. I wrote them and told them that since they didn't give me the card that they said they were going to, that I wanted the bogus card canceled. That was many years ago. They still send me offers every month and I ignore them. If you do a google search for "capital one no hassel card", you can read up on the fine print for the rewards.

Okay, now that I'm done ranting about C1, you need a credit card to have a good credit score, so don't cancel that Orchard one unless there's an annual fee. Pay off the balance and never keep a cc balance again. There's a really neat forum to learn how to build up your credit score.

Here is a link that might be useful: The Credit Boards

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dave_donhoff

Hi Sweets,

I'm just dogpiling in agreement with Dreamgarden & clg;

1) DO the balance transfer to the lower rate card... but then haul booty to get the balance paid off & keep it off,
2) If OB has no annual fee, keep it open... else, close it.
3) Keep screening the new card offers, and was-rinse-repeat (but never leave a monthly unpaid balance if you can avoid it.)

ULTIMATELY what you want is;
A) 3-5+ revolving open credit cards,
B) Used once per 60 days (even just lunch or a tnak of gas is fine,)
C) But NEVER with a unpaid balance left in place (pay them in full as soon as able,)
D) Each account "seasoned" as an open, active account for as long as humanly possible (time open is your friend in credit,)
E) Each account having AS LARGE of an available limit as possible (more available, active (though paid down) credit is generally your friend for scoring purposes.)

Don't get snookered by the "common sense" assumption that merely having lots of credit available somehow looks bad "because you *cuold* potentially use it." The reasoning is faulty in the credit banking world.

The credit system wants to know how trustworthy you are at playing the game of "borrow and repay the money." The more other banks have developed trust in you (evidenced by their credit limit growth for you,) the more the system overall trusts you.

Since many (most?) credit accounts have a "no interest charged" grace period between the time you use the credit and repay it (if you hustle,) you can establish your credit trustworthiness WITHOUT "paying the piper" the interest to do so.

Its ALL about financial maturity and discipline... no surprise.

Good luck!!!!
Dave Donhoff
Strategic Equity & Mortgage Planner

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marys1000

Do you have a good credit union you could join? They sometimes have good credit cards.
Also - be aware of transfer fees on credit cards. I'd pay off the one then start using the other. Transfer fees can be up to 75.00

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dadoes

DH had trouble getting credit cards, of course but we found the Orchard Bank credit card with a $300 limit to start with. We got it in April. His interest rate was not low at all (18%) but we made small purchases and have paid $50 each month instead of just the low $15/month rate.Is there a specific reason why NOT paying the balance in-full is advantageous to building a good credit rating? Perhaps something about your specific scenario?

I've had credit cards for years, but I've *never* carried a balance (except in ONE case of an item on a Tweeter card, no interest for a year .. but I did make monthly payments to get it finished before the time was up). When I bought a house again in January 2005, my credit rating was in the lower 800s. 820? 830? something like that. The girlie at the title company remarked it was one of the highest she had seen.

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sweets98

I haven't really messed with credit cards. The reason being was that I didn't really have credit when I got with DH and his was bad. We stopped using his credit (didn't want to make things worse!) and I went and got the utilities and what not in my name and worked from there. Because DH's credit was bad, mine was pretty much nonexistant and our income wasn't all that great (I have been a SAHM since DS, now 8 1/2, was born because he was born premature and our financial and vehicle situations made it hard to do much else), we have learned to be cash only people. We have worked hard to repair the damage that DH made years ago and it's just scary to be out there working to build our credit now. We've worked backwards, basicall. I mean most people start out together with good credit, get things and then end up in the hole. We started that way. I just don't EVER want to be stuck with another mess. Most of my "experiences" with credit cards and loans have been listening to others horror stories, some not so great. I just want to do what's best, without making a mess for ourselves.

I haven't thought to just go ahead and pay off the balance of the OB card because of advice that I got from someone at a credit counseling service in the area (we didn't go through them, I just called when we were working on fixing stuff and I had a question or two and they answered them) This woman said to start small with one card, make a few purchases, make the monthly payments, pay it off, let it sit, use it, pay it off. Then start another card and do the same thing until we had a few cards. She said that way we were establishing a GOOD credit record. Is this right?

"Don't get snookered by the "common sense" assumption that merely having lots of credit available somehow looks bad "because you *cuold* potentially use it." The reasoning is faulty in the credit banking world."

This is MIL's VERY theory! She was the one telling DH to drop the OB card and stick with only one because it would hurt us to have too many open credit options. That is why I wanted to ask others and why I came here. MIL has good credit but I guess that doesn't mean that she always knows what is right! I mean, I forget that she didn't want a Debit card because she thought it would only ruin them! LOL The only got one within the last few years when they realized a lot of places wouldn't take a check anymore.

Never leave a balance on a card? Really?! My grandparents were bitten by that one. They had a card for over 25 years that dropped them. They would buy things and pay off the balance every month. They weren't making money off of them and told them bye-bye. It was a Visa Gold card of some sort.

BTW~I believe OB does have an annual fee. Like I said, it wasn't the best card but it was the only one DH could get.

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littlebug5

Never ever EVER leave an unpaid balance on a card. If the credit card company gets mad and cancels the card, get a different one! (One WITHOUT an annual fee.) Who are you trying to benefit here? You, or the credit card company?

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sweets98

Wait. Am I reading this right? I have a cold and have been a little 'DUH' lately so maybe I read something wrong.

I was taking unpaid balance to mean that you should always pay the credit card off in full every time instead of making payments. All of our payments have been paid on time at triple and quadruple the minimum payment.

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dave_donhoff

Sweets,

A) Never EVER be late on your payments,
B) Never EVER pay LESS than the minimum due,
C) ALWAYS pay AS MUCH (all, if possible) of your monthly balance,

Hearing of a credit card company cancelling a cardholder's account because they never left an interest-charging balance... that's a first for me... but have no fear, there will be a hundred offers for someone who is never late but uses the card anyway (even if they pay it in full each month forever.)

Cheers,
Dave Donhoff
Strategic Equity & Mortgage Planner

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joyfulguy

Hi sweet thing,

When you have zero owing on the card, then buy something and pay off the balance owing in full after you get the statement and well before the due date, in order to avoid the problem of them not receiving it in time, there is no interest to pay.

Supposedly, you're using their money ... at no fee.

But they're not in a hurry to pay off the stores ... and the stores must pay a fee (which every customer, including the ones buying for cash, helps pay for).

Not only that - the store owner has money in hand instantly from cash customers, doesn't wait for 6 weeks or so to see money. And his staff wouldn't like to recccceive a prommmmmis-sorry notttte, payyyyable in 6 weeeeeks, when paycheque is due tonight (or have the paycheque bounce)!

When you pay only part of the balance owing by the due date and leave part of the debt unpaid till later, the credit card company begins to charge interest (at that high rate) beginning at the date of the purchase. I've heard that some charge it on the full amount that was owed at the time of purchase, through until the amount is fully paid off.

A while ago I'd not paid off my balance owing by the due date, so had some interest to pay, and added an estimated amount to cover that.

On my next statement, I was owing ... one ... red ... cent!

That, if they were paying full rate, would have cost $0.52 for the stamp ... but, even at the reduced bulk rate, it was costing them a substantial amount to send the letter.

I called ... to find out whether they were charging interest on the full amount that I'd owed, or only the unpaid balance, and the guy assured me that they charged only on the unpaid balance.

Actually ... the gal that I'd talked to first cancelled the one cent owing!

So ... don't tell me that credit card issuing agencies are *totally* heartless!

If you transfer a balance, often there is a transfer fee. Sometimes the company into which it is being transferred will pay it, but not often.

Be careful when you do - don't make any new purchases on the card into which the balance was transferred, for in most cases, the total amount that you pay monthly goes to pay off that transferred amount, on which they are not making any reurn.

In the meantime, your new purchases are having nothing paid off on them, but are racking up interest every month (and interest on the unpaid interest) until the total amount that you transferred is paid off.

Which results in you having a balance owing, with a good deal of interest added on, that has to be paid off (usually at a fairly high rate).

So - when you transfer a balance, check before you transfer whether there's a transfer fee.

And once transferred, make sure that you make no new purchases on the card into which the balance was transferred until the transferred balance is paid in full ...

... unless that card's regular interest rate is lower than that on other cards that you carry.

Usually you make an application ...

... and when they accept you and send your card ...

... that's when you get to see the agreement.

Be sure to read all of the small print.

And it would be smart to ask them for a copy of the agreement before you sign the application ... if you're going to buy a pig in a poke, better make sure that at least it's not a wild pig!

Good wishes to get your credit repaired. It's a lot more pleasant to boss your dollars rather than letting them boss you.

Then, later, having some cushion on hand, to cover things in case of an emergency, helps keep blood pressure in check, as well! So it's smart to build up an emergency fund.

More wiggle room in case of trouble.

Unemployemnt and such unpleasant experiences.

ole joyful

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oh_my

Never ever get a Capital One credit card!!! They are backhanded, sneaky, and will do anything they can to get as much money out of you as possible.

Do not close the card you have already, even if you transfer the balance, because that affects your credit score poorly.

Whatever neighborhood bank you use should be able to offer you a credit card and maybe do a mortgage for you down the road.

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dadoes

Sweets98, I've not yet accumulated 25 years on a ccard account, but I am up to 20 years (I think) or close to it. And yes, I do mean that I pay the balance in full when the statement arrives. If the statement balance is $300, and the minimum payment due is $20, I pay $300. Not $60 or $80. The FULL $300. Next statement, if I don't charge anything anew, is ZERO. I've NEVER paid even $0.01 interest on a ccard. Well, except once on a foreign-currency transaction which was considered a cash advance (cash advances often do not have a grace period, interest begins immediately). A couple cards, I rarely use, maybe ONCE per year (or less). None of them have dropped me. If they did, I wouldn't much care. Their loss, not mine. The card bank may not be making any direct revenue from ME, but they get transaction fees from the merchants when the card is used.

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hilltop_gw

sweets98, RE: the comment: "Never leave a balance on a card....grandparents were bitten by that one and CC told them bye-bye. It was a Visa Gold card of some sort."

I've had one CC for 29 years, a Visa, now Visa Gold and have paid off the balance in full every month and never paid a finance charge or fee. The CC company loves me and has gone to bat for me on several occasions when there's been a dispute over a charge. They make money off the transaction fees paid by the store where I make the purchase.

If I were in your shoes, I'd likely keep one card and use it for small purchases & pay it off in full every month. If there's a history of credit problems, the temptation of using the 2nd card could cause problems.

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blase73

Sweets, why would you keep a balance every month? If you charged $100 last month and you get your statement, pay off the whole $100, not just $50, and you won't accrue any finance charges. It doesn't matter how much over your min payment you're paying if you're not paying it off in full.

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breenthumb

Another way to think about CC. Whenever you buy anything on credit, and are not paying it off completely when due, you are paying more for each item you buy.

Seems like a no-brainer, but it boggles my mind how people flock to "sales" then pay CC interest on their purchases. Where's the savings? Sandy

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