I just recently received my WAMU (formerly Providian) credit card statement in the mail with a special surprise inside!

"Important Notice of Change"

Effective May 1st, 2008

• New APR Prime + 23.99% (which, as of today is 5.25% + 23.99% or 29.24%)
• returned check fee $39

I, of course, called and the customer service person told me I had 2 options, to accept the new % or I could close my account and lock in the rate I currently have.

Problem I see with that is the effect closing this account will have on credit scores!

Closing a credit line-and one with an existing balance.....twice as bad.  She told me "its OK, they report it as a consumer closed account" -just for the record, that has no bearing on your credit score!-but closing an account certainly does)

Credit card info on your credit scores take into account the following ratios: # of lines with balances and overall credit limit to credit balances.

Let's use this as an example:

I have 3 credit cards each with a $10k credit limit and 2 have a $5k balance on each.

If I close one but it still has a balance, then my credit bureau sees and scores on the following:

2 credit cards open, 2 being used-ratio 100%

total credit limit available now only $20k, total credit used $10k ratio 50%

So what do you do if you can't pay off the card right now?  Go with the higher rate or close the account and roll the dice on what it will do to your credit score-Also, the older the card is, the more important it is to your credit scoring.

 (Oh, did I mention that they also last year decreased my credit limit from $20k-$13k because they can........and I have a 700 credit score and have never been late on a payment) 

This banking liquidity issue starting from the real estate collapse has moved into so many different areas of our economy and it is having a rippling effect into other areas.

If you have a WAMU credit card-or any card that is changing your terms on you, before you lock in your current rate, consider what it may mean to your credit score-look at the big picture and make sure the person you are talking to when it comes to your credit actually knows what they are talking about!

 It's a tough market-but it's more than just homes going into foreclosure.......

Michael