Multiple Credit Cards

startingtosave

Hello All,

I've been looking online all morning for an answer to this question and I'm getting very confused! I've tried a search on the forums too but still haven't found what I'm looking for - although if anyone knows that this has been answered before then please point me in the right direction!

My question regards the consequences of having a number of credit cards and not using them i.e leaving them with zero balances.

I have:

Nationwide Gold Card for about three years now - no missed payments and a credit limit of £5000. The balance on this is currently zero and I haven't used it in about 5 months.

M&S Card - used regularly, no missed payments, credit limit of £2500 and a current balance of about £400. This is usually paid off in full every month.

Topshop store Card - Used once for introductory discount now not used and with zero balance.


I have just applied online and been accepted for a Halifax Clarity Card - as my Nationwide Flex Account no longer gives me free International/European withdrawals and I have a holiday in Hong Kong coming up and also spend a large amount of time in Ireland. (The estimated credit limit they have given me is £9000!!!)

Once this new card arrives I had intended to close my Nationwide Gold card and the Topshop card as I have no real use for them and I thought it was bad for your credit rating to have dormant account -however from what I have read this morning it seems that closing credit card accounts can also be damaging for your credit rating?

Seems I have three options:

1. Keep all cards but don't use Nationwide Gold Card.
2. Keep all cards, put a token purchase on the gold card every month and pay this off.
3. Close Gold card and Topshop card.

Any advice?

Thanks!

Eydon

To be honest, no one (other than the credit card firms themselves) knows the actual answer to this. There are two sides:

1) the total amount of credit you have available compared to your income - by closing your unused cards you are reducing this proportion which could be considered a good thing

2) the amount of credit you are actually using compared to how much you have available - by closing your unused cards you are increasing the proportion which could be considered a bad thing.

Personally, if a credit card offers repeat special offers then I tend to keep it. If it doesn't, and I don't use it then I close it.

chexum

Yes, it's difficult to say - likely differs from company to company. When your credit account is shown on any credit file, any potential lender will see the payment statuses going back to 3 years, and for some cards, the actual balances, payments/spending for each of the last 12 months.

If your bank is reporting this information, the others can easily see you're not using that card at all. They can't tell if you lost the card and not bothered to replace it, or genuinely don't need it.

Previously, it mattered greatly that the majority of your credit accounts are not fresh, i.e. older than 18 months - however, if they are, but you're clearly not using them, it may now be ignored. I'm afraid it's even more difficult to learn how they use this information.

I'd say an old store card won't have this detail reported, and one or two extra cards that are sitting with zero balance won't influence your credit risk too much (although I've heard some issuers may set a hard limit, like to extend credit only to people with at most 4 credit cards).

There are other dangers to keep cards unused for long periods - one is that some issuers started to charge dormancy fees (Santander and Amex for example). Another problem is if you had a direct debit, and think that you can forgot about paying the card manually - the DD instructions actually expire in 6-13 months if they are not used. In theory the card issuer should learn about this as they are notified, but that may not stop them charging you for a bounced DD and a late fee if it happens.