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The following happened to me in the past month:

1. I have an account with NextCard. It has a really nice interest rate of prime plus .49%, which, as the Fed lowers the prime rate, goes down. I think it's at 7.49% now. My balance is about $3.7K.

2. I closed two other credit card accounts that I wasn't using, probably about $12K worth of credit. I didn't want all that unused credit lying around.

3. I borrowed $3K on my NextCard account. (Not something I normally do!)

4. Got a letter from NextCard informing me that they wanted to raise my interest rate to 12.99%. I sent them a letter asking why, and they sent me back a canned answer listing four reasons. The reason that seemed to matter was high amount-borrowed-to-credit ratio. I think I had increased this number by lowering my available credit and borrowing.

5. I got a free copy of my credit report from Transunion. It correctly reported that I was current on everything and had no late payments at all. Nothing unusual.

So: what to do? Any ideas? Especially, if I close the account before the new rate kicks in, does the old rate stay in place, or can NextCard change the terms even after the account is closed? I'd be grateful for any feedback.

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