Should I Close My Credit Card If I Have A High Interest Rate?

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Are your credit cards charging more interest than you can afford? Are you wondering if you close a credit card does the interest stop? A high-interest credit card can make it a lot harder to pay off credit card debt, and even if you only carry a balance on your credit cards occasionally, high interest rates can cost you a lot more money than you may realize.

A high-interest credit card comes with big costs so, knowing how to lower credit card interest rates — by switching cards, raising your credit score or contacting your credit card issuer — is an important financial skill.

What is a high interest rate for a credit card?

Right now, the average credit card interest rate in the United States is around 20 percent, with variable APRs often ranging from 18.24 percent to 29.99 percent. A high interest rate for a credit card is anything significantly higher than the average — say around 30 percent APR, for example.

If your credit card has a high interest rate, you might want to try securing a lower rate. You’ll either need to contact your credit card issuer to request a lower credit card interest rate or cancel your credit card and apply for a low-interest card instead.

How expensive is it to carry a balance?

Curious about how much interest you will pay on your credit card balance? It depends on your current APR and the balance you’re carrying on your credit card. A good credit card calculator can help you figure out exactly how much your unpaid balance might cost you.

Let’s say you have a $1,000 balance on a credit card with a 29.99 percent APR. If you make a $30 minimum payment on your credit card every month, it will take 73 months (more than six years) to pay off your debt in full — and you’ll pay a whopping $1,175 in interest charges.

If you decide to be a little more aggressive about paying down your credit card debt and put $100 toward your balance every month, it will take only 12 months to pay off your credit card and you’ll only pay $165 in interest.

When should you ditch your high-interest card?

Half (50 percent) of American credit cardholders carry a credit card balance from month to month, according to Bankrate’s most recent Credit Card Debt Survey. If you find yourself within this majority, then there are a few scenarios where it may — or may not — make sense to get rid of a high-interest credit card.

Scenario 1: You always carry a revolving balance month to month

If you are carrying a revolving balance on your credit card, you’re likely paying a lot of interest on that balance every month. When interest piles up, even as you make payments each month, it can feel like you’ve dug yourself into a hole. That means it’s probably time to look for a lower-interest option, such as a balance transfer, and put that high-interest card to rest.

Scenario 2: You always pay your balance on time, but you pay a high annual fee and a high interest rate

If your high-interest credit card isn’t costing you a lot of extra money in interest because you pay your balance off in full every month, you might not want to ditch your card quite yet. Having multiple credit cards is good for your credit score, so consider keeping your high-interest account open while you look for a new card with lower interest or better credit card rewards. Once you find a credit card you really like, you can make it your everyday spending card.

However, if you always pay your balance on time but have a high-interest card that charges a high annual fee, you may want to ditch that card if the fee is no longer worth it. You can either cancel the card completely or downgrade your credit card to a no-annual-fee version. Paying an annual fee on a card that’s charging you high interest rates isn’t always a great option, and there are plenty of no-annual-fee credit cards that might better suit your needs. If you have good credit, you’re more likely to be offered lower interest rates.

Tips for paying off high-interest cards

If you have a high-interest credit card with debt, it’s better to pay it off sooner rather than later. Here are some tips to help you through the process:

• Pause spending on the card
  

  If you’re carrying a revolving balance and finding it hard to stay afloat with your high-interest credit card, you might want to pause spending with that card and switch to a debit card instead. Put off all unnecessary spending — especially costly items — unless you can pay cash or a debit card. In the meantime, you can focus on paying the balance on that high-interest credit card without growing it consistently through everyday spending.

• Ask for a lower interest rate
  

  If you occasionally struggle to pay off your balance on time and in full, consider asking your credit card issuer for a lower interest rate. If you don’t typically fall behind on payments, your credit card issuer may be willing to work with you. It’s important to be proactive in a situation such as this because you don’t want to rack up debt on a high-interest credit card due to falling behind on a few payments. Try your luck negotiating and ask for a lower interest rate.

• Consider a balance transfer credit card
  

  By transferring your balance to a credit card with a 0 percent introductory APR period, you’ll have the opportunity to pay down your credit card debt without accruing interest. To qualify for a balance transfer credit card that offers a long interest-free period, you will need to have good or excellent credit. However, there are options for individuals with fair credit, too, though the promotional period will likely be shorter.If your new balance transfer card doesn’t allow you to transfer your entire balance from the high-interest credit card, you will need to keep that account open until it’s paid off. In that case, do the math to determine what’s best for you – should you focus on the high-interest balance first or the amount you transferred? Consider factors like:

  • The ongoing interest rates for both cards
  • How long the intro period lasts for your balance transfer card
  • How much you can commit to paying on the balance each month

  In some cases, you may want to pay off the transferred balance as soon as you can in order to take full advantage of the 0 percent intro APR period allocated on your new balance transfer card. Or, it may make sense to focus on paying off the remaining balance on your high-interest card.

How to get rid of high-interest credit cards

If you’re done with your high-interest credit card and not interested in switching to a new card, it may be best to cancel the card. There are a few steps to take for this:

1. Pay off the balance: You’re responsible for your debt, the minimum payments and the interest, if you close your card and it can do major damage to your credit score. A way to avoid this can be either paying it in full, making a balance transfer or getting a debt consolidation loan.
2. Make sure to switch over any recurring payments: Whether for streaming or utilities, make sure to move those services to a different card to avoid any lapse in payment, which might result in services being stopped or a late fee.
3. Contact your issuer: Simply call the customer service number on the back of your card and confirm that your balance is zero and that you want your account closed. Make sure to note the name of agent you’re speaking with and ask for confirmation, written or digital, of your account closing. This way, you have proof should there be an issue later.
4. Destroy the card: While the card is no longer in service, people can use it to access personal information. For your safety, it’s best to destroy the card soon after you have confirmation that your account is closed.

The bottom line

A credit card with a high interest rate can cost you a lot of money over time if you aren’t able to pay off your balances in full every month. If you’re currently carrying a balance on a high-interest credit card, consider transferring your balance to a balance transfer credit card and ditching your high-interest card.

Remember that since your credit score affects the interest rates you are offered, you might want to avoid canceling a high-interest credit card altogether. Instead, you can transfer your balance (or pay it off in full) and let the account remain open and in good standing. That way, you’ll increase your available credit and potentially boost your credit score.