What Do You Do When Your Credit Card Has Been Armed With An Interest Rate Trap?

Harry’s got a problem: the Bank of America card he’s had for years is paid off, but now it’s been set to explode in Harry’s wallet if he ever uses it again because the variable APR will jump to 29.99 percent. What’s worse, his other card has been canceled. Now Harry doesn’t know if he should start using the BofA card or back away quietly from it.

He writes:

I have a question for the Consumerist Hive Mind.

I recently paid off a longstanding balance of $5300 on my ten year old Bank of America credit card (woo!). But now I am left with a quandary. In June, I was one of the thousands who were notified of the automatic and wholesale rate hike on my card, from 19.99 variable to a whopping 29.99 var! I opted out, and basically agreed to never use my card again (lest they automagically raise the rate by my implicit agreement to the new terms). Flash forward to today, when I have recently had my rarely used Chase card cancelled due to inactivity, which was no big deal given it’s low limit and high interest rate, thus my concern.

My question is: What should I do about my BofA card? I don’t want my oldest and largest line of credit cancelled for inactivity, but I also don’t want to use it and have my interest rate jacked up! I’m older and smarter now, and am finally Credit Card debt free, but I also understand the importance of this account with regards to my credit score. I was planning on setting up my netflix account to auto post to this CC and then pay it off every month in order to keep it active. What are your thoughts on this matter?

I’ll start! My advice, Harry, is to start shopping around for another card on sites like Billshrink or Bankrate. There may be nothing now, but keep checking periodically–Billshrink’s co-founder Samir Kothari said last month that he’s hopeful that some issuers will start to get more aggressive about new business in the coming months.

As for your current issue, whether you use your ready-to-explode BofA card depends on two factors: your ability to control your spending for the next 6-24 months until the card market improves enough that you can find a better deal, and how badly you want Netflix.

You’ll probably always want to use a credit card for bigger purchases since it normally provides more protection than paying via cash or debit card. However, if you can use the fear of a sky-high interest rate to keep yourself from touching the BofA card, or if you can promise yourself to never use it unless you have the cash to cover the full balance each month, you might be able to use the threat of that ridiculous APR to maintain discipline during this one-card phase of your financial life.