We continue the month with our topic of Credit Cards. We all know owning a credit card can be tricky, so Credit Card Manager Tony DeSanctis from Bank of Hawaii is here to help answer some of our viewers’ questions.
First question comes from Jared, who asks, “Is it better to pay off my credit card debt all at once, or just pay the minimum amount on my statement?”
It’s important to know what works best for you. If you are able to pay off your entire statement balance each month, that’s great because you won’t pay interest on balances. If you are in a promotional period, where there are lower or even zero interest charges on balances, then you might decide to just make the minimum payment. Best thing to do is to figure out how much you can afford to pay each month so that when the promotional period ends, you can still pay off your balance.
A lot of cards offer promotions where you can get an introductory interest rate for a certain period of time, usually 12 to 18 months, on balance transfers. Some cards will also offer the introductory rate on purchases, so there can be some good deals out there. It’s important to inquire on what the post-promotional interest rate will be before you open the credit card. Also, you should take the time to calculate what your payments will look like if you don’t pay off your balance during the introductory period.
Our next question comes from Joanne. She asks, “If I close a credit card after six months and then open another with a lower interest rate, will that affect my credit score? What happens to your score if you open or close a couple of credit cards within a year?
The answer is, yes. Anytime you open or close a credit card, it will impact your credit score. Therefore, you want to make sure you open credit cards that make sense for YOU. Closing credit cards will impact your credit score since it will affect the length of your credit history and credit line utilization. When you close a credit card, it may look as though you are utilizing more of your credit line even if you are not spending more on existing credit cards.
If you have a SmartMoney question you’d like answered, go to our website to post your credit card questions.
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