This is part of our Financial Literacy Question and Answer series

Question: I have an extremely low APR (6.24%) with one credit card company, and am pretty good at making my payments on time, if not early. However, another credit card company has raised my APR to 29.99%. They’ve offered to close my account at a set APR of about 3% or so but I’m afraid of how it will affect my credit. What can I do about it? Thank you! ~ Renee

Answer: Hi Renee, that’s a great question. Normally I would discourage you from closing your credit cards because it can hurt your credit score.

However, if I was in this situation, I’d take the hit on my credit score for the short term and get that 3% interest rate! If you owe $10,000 and your minimum payment is $260, it will take you 11 years and you’d pay $24,231 in interest!

If your interest rate is 3% and you continue to pay $260, you’d  have it paid off in about 3 years and the total interest would be $527! That’s a big difference!

In time, your credit score will recover and, you’ll save a lot of money in the meantime!

You may want to get my Pay Debt Quickly so you can create your own debt payoff plan. It’s fun to see what a change in interest rate or increasing your payment will save you in interest charges!