Is It Bad To Cancel Credit Cards

cjohnson355

Hi,

I'm confused, please could someone advise.

Over the past few years I've been juggling balances on my credit cards by transferring the debt onto cards that offer 0% over a certain period. However when I've left one card for another I have not cancelled that card. I've again just done what is hopefully my last balance transfer (wahoooo). I've got three cards sat in my purse doing nothing now and I will never use them. I've read that if you cancel a credit card this affects your credit score but I also read that if a credit card company cancels the card due to inactivity this also affects your credit score. I've worked extremely hard over the past three years to improve my score. Any ideas what I should do about the redundant cards?
Many thanks.

Kate

Jammi

cjohnson355 wrote: »

I've got three cards sat in my purse doing nothing now and I will never use them.

If you've got cards that you will never use, it's a good idea to cancel them.

If either you or the Credit Card Company cancels them it will simply show as "settled" on your credit files and does not have an adverse effect.

someone

It could affect your score as these cards still have a credit limit and lenders only like you to be able to have access to x% of your annual income.

On the other side they also look at the % of credit your actually using, very high and very low percentages tend to look bad. Cant remember why the very low bit is looked on as bad but the high percentage makes them think your applying because you have no other option (i.e. running out of money)

ironlady2022

If you have no intention of using them then cancel them, it willbe better for your credit score. Bear in mind, if you need credit in the future you will have to apply again.

themull1

If you dont cancel any card, you won't be able to do a o% for ever, you will run out of card providers.!! I've just cancelled an old HSBC and an old barclaycard, incase, in the future i need to use them for a 0% credit deal!!

Paulgonnabedebtfree

Some good replies. You m ay also want to consider that it is better to pay for certain items by credit (not debit) card because it gives you extra protection if the company goes bust (e.g. paying a deposit for a holiday or kitchen). Even if you have saved the money, just pay by card and pay the card with the savings.

Martinslovechild

There are positives and negatives with holding credit cards with zero-balances.

Positives
You may be offered deals in the future. After you not using your cards for a while, some providers (e.g. MBNA / Santander / Halifax) may attempt to "bring your account back to life" by offering you a new 0% balance transfer (with no fee in recent cases from Santander). This saves you cancelling and reapplying with other card providers.

Negatives
The amount of credit available to you (note: this doesn't mean that you're actually making use of it, it's simply there should you wish to use it) is taken into consideration should you apply for further credit in the future (e.g. remortgage, car loan, further credit cards). Three credit cards can easily account for between £10,000 - £30,000 worth of credit.

Depending on the level of your income, this could account for anywhere between 50% - 100% of your annual gross salary. Put yourself in their shoes - would you want to offer somebody more credit when they already have a substantial amount available to them?

Only you can decide what to do with your cards. This will be based on your likely future credit requirements. If you are considering purchasing a home or remortgaging in six months or less, I would seriously consider closing the accounts sooner rather than later as it usually takes a couple of months for the updates to hit your credit history (held with Experian, Equifax & Call Credit).

Credit Reports
Whilst we're on the subject, it's definitely worth getting hold of your credit report (I usually recommend Experian AND Equifax as they're the two largest firms - and contrary to popular belief, the reports are not identical because different credit providers use different credit report agencies). Once you've cancelled any cards, you'll need to allow a couple of months for the closure to appear - don't close your accounts and expect this to appear the following week!. Statutory Reports from the credit reference agencies cost £2 each (don't be sucked into paying the far more costly monthly subscription to CreditExpert and the likes).

Cheers.

DrSyn

It might be best to have only two credit cards for safety reasons. Each card with a different company. Keep one at home & only used every 6 months. They other you carry with you and use normally. If one is lost or stolen you have immediate access to alternative credit.

Also I understand that card companies now view having many cards as a credit risk.

cjohnson355

A massive thank you to everyone that replied x. I'm still however unsure what to do. There seems to be mixed views on this topic. Why is finance sooooooo complicated??? lol. I just want in an emergency to be able to buy something on credit without worrying whether it will be accepted or refused. I was once refused credit on buying a laptop from Currys. Very embarassing!

loveandlight

In my opinion, even if you keep for emergencies as you say, it still won't stop the cc companies from cancelling them all together out of the blue if they decide they don't want you to have them anymore no matter how good your score is.

I had a card with the Co-Op with a high cc limit that I'd had for many years and made the mistake of going into my local branch one day for something else. The manager wanted me to take out a new card he was promoting and I told him no thanks I'm quite happy with the one I've got, as its got a nice limit on it which I keep for emergencies. His reply was that limits can easily be taken away at the click of a button. I took that as a form of blackmail but still said I didn't want the new card he was promoting and lo and behold 7 days later I got a letter telling me the Co-Op had completely removed my cc limit which effectively meant the card had been taken off me.

If its that important to you, you can get a prepaid cc and keep that for emergencies instead?

HTH.

Degenerate

You need to judge each card on it's merits. Does it offer good benefits? Things like cheap overseas spending, insurance on purchases etc can make a card worth keeping. Is the provider known to come up with good existing customer offers? MBNA and Barclaycard are well known for this. If the card has no redeeming features then dump it, otherwise just be sure to use it now and then to keep it alive. If you're concerned about your total available credit or ratio of used to available credit then you could also consider reducing credit limits.