How will it hurt me to cancel a card I just was approved for

Discuss anything related to interest rates & fees, like balance transfer offers, low rate cards, annual fees, etc.
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docdaddy
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How will it hurt me to cancel a card I just was approved for

Postby docdaddy » Wed Aug 12, 2015 9:17 am

Situation: make about $170K a year, mortgage is about $1200 per month, have a Discover with a too high balance (about $15K) and rate of about 16.99, limit is about $17K. Another CC from my credit union, balance is about $9K, limit about $10K, rate is 10.99%. FICO is around 750.

I wanted to get a new CC with a 0% for say 18 months and no worse rate than my current Discover in order to transfer as much balance as possible and try to start getting it paid down. I saw some ad for a Citi card that was 0% on balance transfers for 21 months, which sounded great, so I applied online.

I immediately got approved - but only for $3000 and the interest rate after the 0% was 18.99%. Well, I get offers in the mail every day for 0% BT and usually something like 18 months at 0% or 16 months at 0%, and they usually quote a rate of around 14.99% and "You have been pre-approved."

Here's my question, as I am dumber than I need to be in this stuff: A card with only $3000 limit and 18.99% is not something I would have accepted had I been talking with someone on the phone. But my feeling is that, having just been approved for this, it probably hurts my chances of trying to get a different card now with a higher limit and lower interest once the 0% runs out - is that true? Also, if I call and cancel the card I just got approved for (it hasn't even arrived yet) does that also hurt me, especially in terms of trying to get a better deal with another card?

Thanks!


Vermonster
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Re: How will it hurt me to cancel a card I just was approved for

Postby Vermonster » Wed Aug 12, 2015 11:29 am

Well the short answer is, yeah that wasn't exactly the best choice. I think the Chase slate is the only card that doesn't charge a BT fee, and has a very reasonable APR post 0%. But 21 months at 0% is pretty good. The problem is that you will never know the APR until you have been approved for it, so even if it was over the phone you would still be canceling a brand new card. You limit is really being hurt by your high utilization. This is the catch with BT cards. When you need one, you can't get one.

Now the good part of what you did is that you got a Citi card. From what I have heard, they are much more flexible in upping your limit for a BT. They also are more willing to lower an APR than most other lenders. So I would call and talk to a CSR. Tell them you want to do a BT, you have $24k on other cards that you would like to consolidate to one card. Explain that you wanted to put it all on one card and pay it off over a few years. You might be able to get a significant increase to your limit if they know that right off the bat they will get that 3% fee on $24k. You want to ask for the full $24k but expect them to come back at a lower limit. Also expect a hard pull again for the cli. This all sounds bad, but you have a much better chance of getting a decent limit on this card than you do applying for another card.
Chase Freedom $9k~~Chase Sapphire Preferred $6.5k~~Amex Blue Cash Preferred $12.4k~~Citi Double Cash $4.7k

takeshi
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Re: How will it hurt me to cancel a card I just was approved for

Postby takeshi » Thu Aug 13, 2015 11:08 am

docdaddy wrote:Situation: make about $170K a year, mortgage is about $1200 per month, have a Discover with a too high balance (about $15K) and rate of about 16.99, limit is about $17K. Another CC from my credit union, balance is about $9K, limit about $10K, rate is 10.99%. FICO is around 750.

It's never just about score itself and you don't have just one score. With a card at 88% (15K/17K) and another at 90% (9K/10K) applying for a new card with the intent to balance transfer is a bad idea. High revolving utilization will restrict the limits and APR that you will qualify for.

docdaddy wrote:A card with only $3000 limit and 18.99% is not something I would have accepted had I been talking with someone on the phone.

Talking on the phone would have made no difference. APR's and limits are not disclosed until they've pulled your credit and approved you.

Revolving utilization is a significant scoring and risk factor. General advice is do not exceed 30%. You've not only exceeded that on 2 cards but you've maxed one and you've nearly maxed another. These are major red flags and applying with utilization like that is a bad idea as you've discovered.

Back in 2012 my revolving utilization was well over 60%. I didn't know anything back then and I also thought that a BT card would help so I applied for the Slate. I was approved with a $2K limit and the highest APR offered. That limit was of no use to me. 6 months later I had my revolving utilization well under 10%. At that point Chase instantly approved 2 cards within a day of each other with $25K limits each. Cards with APR ranges were issued at the lowest APR. I'm not saying that your credit supports such limits or APR's. This is just an example of how constricting revolving utilization can be.

docdaddy wrote:But my feeling is that, having just been approved for this, it probably hurts my chances of trying to get a different card now with a higher limit and lower interest once the 0% runs out - is that true? Also, if I call and cancel the card I just got approved for (it hasn't even arrived yet) does that also hurt me, especially in terms of trying to get a better deal with another card?

Your credit profile was already an issue before you applied for that card. When you applied for that card you incurred a hard pull. When the account reported it reduced your average age of accounts. Closing the card at this point will not reverse those effects. Closing now could look bad on manual review but it probably doesn't matter for an automated review. Again, your problem is you extremely high revolving utilization. The only way to address that is to reduce those card balances.

You'll want to reduce them ASAP. Short term high utilization generally isn't an issue but prolonged high utilization can lead to adverse action. Things like balance chasing and closure will make your situation worse as they will cause those accounts to spike to around 100%.

Make sure you're budgeting and sticking to your budget. Aim to get to where you're paying your statement balances in full each month.

Assuming that the cards mentioned are your only cards and that the new card has a 0 balance, the new card is reducing your overall utilization to 80%. If you closed that card your overall utilization would increase to 89%.
Last edited by takeshi on Thu Aug 13, 2015 11:25 am, edited 6 times in total.

docdaddy
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Re: How will it hurt me to cancel a card I just was approved for

Postby docdaddy » Thu Aug 13, 2015 11:19 am

takeshi wrote:
docdaddy wrote:Situation: make about $170K a year, mortgage is about $1200 per month, have a Discover with a too high balance (about $15K) and rate of about 16.99, limit is about $17K. Another CC from my credit union, balance is about $9K, limit about $10K, rate is 10.99%. FICO is around 750.

It's never just about score itself. With a card at 88% (15K/17K) and another at 90% (9K/10K) applying for a new card with the intent to balance transfer is a bad idea. High utilization will restrict the limits and APR that you will qualify for.

docdaddy wrote:A card with only $3000 limit and 18.99% is not something I would have accepted had I been talking with someone on the phone.

Talking on the phone would have made no difference. You don't get the APR and limit until they've pulled your credit and approved you.

Revolving utilization is a significant scoring and risk factor. General advice is do not exceed 30%. You've not only exceeded that on 2 cards but you've maxed one and you've nearly maxed another. These are major red flags and applying with utilization like that is a bad idea as you've discovered.

Back in 2012 my revolving utilization was well over 60%. I didn't know anything back then and I also thought that a BT card would help so I applied for the Slate. I was approved with a $2K limit and the highest APR offered. That limit was of no use to me. 6 months later I had my revolving utilization well under 10%. At that point Chase instantly approved 2 cards within a day of each other with $25K limits each. I'm not saying that your credit supports such limits. This is just an example of how constricting revolving utilization can be.

docdaddy wrote:But my feeling is that, having just been approved for this, it probably hurts my chances of trying to get a different card now with a higher limit and lower interest once the 0% runs out - is that true? Also, if I call and cancel the card I just got approved for (it hasn't even arrived yet) does that also hurt me, especially in terms of trying to get a better deal with another card?

Your credit profile was already an issue before you applied for that card. When you applied for that card you incurred a hard pull. When the account reported it reduced your average age of accounts. Closing the card at this point will not reverse those effects. Closing now could look bad on manual review but it probably doesn't matter for an automated review. Again, your problem is you extremely high revolving utilization. The only way to address that is to reduce those card balances.

You'll want to reduce them ASAP. Short term high utilization generally isn't an issue but prolonged high utilization can lead to adverse action. Things like balance chasing and closure will make your situation worse.

Make sure you're budgeting and sticking to your budget. Aim to get to where you're paying your statement balances in full each month.


Understood. The goal was to get the balance onto a card with a zero interest rate in order to pay down the utilization as fast as possible. But it seems to be a chicken and egg type of situation.

takeshi
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Re: How will it hurt me to cancel a card I just was approved for

Postby takeshi » Thu Aug 13, 2015 11:26 am

Unfortunately, it is. As Vermonster says, usually when you need a BT card you won't qualify for what you need.

If you're absolutely sure you won't rack up more revolving debt a consolidation loan is a possibility if you can qualify for one. It would reduce your revolving debt. You'd still have the debt but it would be an installment which is considered differently.

docdaddy
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Re: How will it hurt me to cancel a card I just was approved for

Postby docdaddy » Thu Aug 13, 2015 2:26 pm

takeshi wrote:Unfortunately, it is. As Vermonster says, usually when you need a BT card you won't qualify for what you need.

If you're absolutely sure you won't rack up more revolving debt a consolidation loan is a possibility if you can qualify for one. It would reduce your revolving debt. You'd still have the debt but it would be an installment which is considered differently.


Thanks we're actually investigating a couple of companies with good reviews for a student loan our daughter got burdened with and they offer to include enough for a cc debt also. But doing a LOT of investigating first. We actually were doing very well, then lost two jobs and had two moves during the recession, including losing tons on selling two houses in that time. :(

Sounds like we'd be better off just accepting the new Citi card even with it's low limit and ultimately high rate, and only charge a small something on it each month and pay that off each month, just to even slightly reduce our utilization rate.

Kevin86475391
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Re: How will it hurt me to cancel a card I just was approved for

Postby Kevin86475391 » Mon Aug 24, 2015 7:15 pm

docdaddy wrote:Sounds like we'd be better off just accepting the new Citi card even with it's low limit and ultimately high rate, and only charge a small something on it each month and pay that off each month, just to even slightly reduce our utilization rate.


Yeah, you probably would be. On the bright side, however, you really may be able to get Citi to raise the limit. I'd give it 3-6 months as is then ask for a CLI. That would still give you over a year at the 0% APR. In the meantime, pay down as much as you can on the other cards and use the new Citi card but don't carry a balance on it.



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