Closing a credit card?

DD265

This is kind of good timing from my bank but I'm not 100% sure which way around to do things and I didn't want to rush into anything!

I have a student credit card with Lloyds, currently 24.44%, limit £1k and not far from maxxed out at the moment. I've been paying more than minimum, though not taking the balance down far as the last couple of months I've needed it for things like petrol. I also have a £1400 O/D and a £4k loan, both with Lloyds. The only other debt I have is my student loan.

I came clean to my parents (I'm 24, live at home, and although I've met all my repayments something non-debt related has come up and I can't cover that too) about my debt during the week and one of the things we briefly discussed was moving to a 0% credit card so that my repayments would have more impact. We haven't done anything about this yet.

I have just come home to a letter from Lloyds about the CC saying that they are putting the interest rate up by 5% - to 29.44%. Apparently this is due to a change in my circumstances on my credit report - don't know what that is about but I get paid on Friday and will order copies (I've done a free trial before).

The letter basically says:

"If you don't want your rate to change you can stay at your existing rate - but it would mean closing your account and you wouldn't be able to use your card again. You'd still need to pay off your balance over time and make at least your minimum payment."

My question is this: Should I close the card or do something else?

I have no desire to carry on with a credit card for the time being. I am working at reducing my debt, not maintaining or building it. However, I read somewhere that closing a credit card can have a negative impact on your credit rating in the short term at least. I suspect that either a) Lloyds are just making excuses to increase my interest rate or b) for some reason my risk factor has gone up and so I'm less likely to get a 0% card any way. An alternative (although again risk factor) would be to see if Lloyds will increase the loan to pay off the card - the loan is 9.9%.

Can somebody advise me?

Tixy

Rates are often increased for very minor changes on a credit file, or down to how you are using the card.

A 0% card would be a good option for this card debt, if you were able to get one. You might want to consider trying to apply for one before you make any decision on opting out of the rate rise.

Opting out and closing the card to new spending will not show on your credit file/ be apparent to other potential lenders.

DD265

Thanks Tixy

I've managed to get a 0% Barclaycard and started the balance transfer process.