What to do with paid off credit cards??

nogoodwithmoney11111

Hi everyone, I must admit to have been using this site for ages but never contributed; i guess i felt that i was in no position to offer advice!! but the comfort it has given me over this period has been immense. I have to say that Martin deserves proper recognition (knighthood!) for the way he has started a movement that has helped so many people that were at the end of their rope.

My LBM was just a bit over 5 years ago when we both had good jobs, good equity in our home and liked the finer things in life. Then we had twins (who came 7 weeks early) and the wheels started coming off. At that time we had been very carefree with our spending as we couldnt see an end to the good times.

At its peak we owed an utterly staggering £77,000 in loans and credit cards (excluding mortgage of around 850/month!) but this was costing us about £1,500 per month to service and we had 2 nice cars on HP and a number of holidays/plasma TVs/computers/clothes getting shunted around interest free credit cards etc.. etc.. This did not seem that much of a big deal as we were both earning a good salary (combined about £5,000 net a month) and we still had leftover money, but not much.

When my OH stopped work to look after the twins it was clear that the maths didnt work anymore........

After some serious life changes, selling the 2 cars once paid off and buying 1 car that was (a lot!) cheaper, a really good clearout on ebay (man do those ebay and paypal commissions take a chunk!!) and throwing every hour of overtime and bonus (yes i did used to get one of those....!) we finally got down to our last £10k in January this year which i have transferred onto a Virgin CC at 0%. I have sadly had an aunt pass away recently but I have been left £8,500 in her will.

Finaly I am in the position of having the following:

I have now got 6 credit cards with a combined limit of £40k with only around £9,200 on the Virgin CC and I (will shortly) have a grand total of around £9,000 in the bank.

So technically i am in the position of now being "debt free" which is an utterly fantastic feeling. The guilt I feel over not putting anything away yet for the twins is still palpable.

I realise I am in a fortunate position now (which has been a real struggle - we are changed as a family forever as a result - for the better i must add!)

I guess, after this rambling, my question is a relatively simple one. I have been checking my credit file online and they have a measure on there that shows how much of your total debt you use each month as a percentage.

We spend everything on an AMEX cashback credit card now and pay off in full via a DD each month - we are getting about £7-£10 back a month I would say.

My worry is if i cancel all the other credit cards and only leave this one (after clearing the Virgin one off) it will look like i use a huge percentage of my available debt each month (say we spend around 40% of the cards limit each month).

I have got into the habit of ordering my credit score every 6 months and watched it rise from the very low 300's :eek: up to a good score now.

So the plan is to pay off the Virgin (my 0% has only got a few months left - the actual thought of no payments is worth more to me that the interest!!!) which will leave me with no debt and CC's with a £40k limit.

Does cancelling cards affect your credit score?

Should I cancel them and try and increase the limit on the AMEX to lower this % borrowed statistic?

Am i obsessing about this statistic???? (cant help it...)


Many many thanks go to all the contributors on these forums who have introduced me to quidco, ebay, etc etc that have helped me turn things around.

Butti

I am by no means an expert on these things.

The CC providers are looking for different things. The fact that you spend on a credit card and pay it off each month looks good in terms of managing your credit and you are still using credit so that will contribute to your score. It won't look good to providers who make money from high interest charges on outstanding balances.

I would be tempted to keep using the Amex and cancel all the other cards. Check what facilities each offer (free overseas withdrawel for example) and decide if you are going to use it. You could keep that additional card for times when it is useful.

B

lesalanos

I would certainly reduce the limits on the cards. Depending on if you are in a position to put away some savings each month this should reduce the need for a credit card. If you are not saving then it may be worth keeping a small available credit for emergencies if things break.

If your cc is still 0% for a while would it be worth investing the £9k you are getting to get some interest on it?

lesalanos

oh and well done on reducing your debts

xyellowx

im in a simular posistion and have cancelled the cards as ive paid them off. my plan is to keep the last one open and use it for the weekly tesco shop then pay off each month to keep the credit file ticking over
the potential borrowing you could use over night will go against you for any other credit you apply for

welldone for clearing your debt the honest way you should be proud

nogoodwithmoney11111

Thanks for words of advice/encouragement. I did investigate putting money in higher interest account and would get about £18 if i paid the Virgin CC off on the last possible day. I am starting to put some money away each month now which is a great feeling. I think I will cancel 4 of the cards and keep the Virgin and the Amex - yellow i am of the same opinion that having to much available will go against me in some way, as my primary aim is that I want to make sure that I get access to good deals for remortgaging rather than take out more unsecured credit.

cheers! :money:

Butti

They don't like you have enormous limits available with nothing on them. I think it generates a feeling of them not being in control, incase you wanted to change your name and move to ...(can't think of anyone we don't have an extradition treaty with!)

B

Tixy

I would definitely cancel most of them.

Personally I would always keep at least 2 cards, 1 for your normal spending as you have, then another for emergencies or anything else. This also helps to reduce the issue of the percentage amount you have. You don't need to take the second card out with you even, some people go as far as to freeze it in a block of ice in the freezer (depends on whether you might be tempted to use it unnecessarily -which to be fair it doesn't sound like you are).

Perhaps if you holiday abroad frequently have a look at which of your others card is the best deal for travelling (in terms of taking cash out etc) and keep that one open and close the others.

mummum2

No great advice really, just wanted to say a very well done for the amount of debt you have cleared:j:beer::beer::T:T, massive achievement.:beer:.

MM2