What to do with rarely used credit card?

Just_30

Hello all,

I hope I have found the right area for my question below:

I have 2 credit cards: an MBNA (Amex) and a Halifax One credit card. The MBNA card gets the most frequent use for monthly spending and work related expenses as I get a decent cashback rate on this card. The card is payed off in full each month by Direct Debit, so I have never payed a penny in interest.

The Halifax card is my "backup" card for large purchases (usually work expenses), used when a place will not accept Amex, which rarely happens these days. Hence, the Halifax card is hardly ever used; perhaps twice in the last 12 months.

I am looking for advice on the best thing to do with this card? I have a credit limit of £4600 which was given to me when I got the card roughly 3 years ago. As far as I can see I have 3 options:

1. Cancel the card. - This is not ideal as I may need to use it where AMEX is not accepted.
2. Decrease the credit limit available on the card. - £2000 limit should be more than enough.
3. Do nothing and leave the card as it is.

The reason I am asking is I want to keep my credit score as squeaky clean as possible (potential mortgage application at some point in the future!).

I understand there are no hard and fast rules with credit scoring but what would be the most favourable option to do with the card? Is there any obvious possitive or negative impacts with the options I have listed above?

Many thanks in advance.

CLAPTON

from the info you have supplied, cancelling the card would seem unwise as you would have no card if the amex is refused, is lost or stolen etc.

personally I would feel vulnerable with only two cards so I would apply for a third card unless you are applying for a mortgage in the very near future.

a 4k limit is quite modest so I wouldn't try to change that but I would ensure I used it a little more regularly in case they cancel it for low activity.

sfax

If you had a balance outstanding on the card and therefore minimum payments, interest payments or just regular payments, it would impact on your affordability for the mortgage, but as you have an unused balance of £4k, I definitely wouldn't reduce it or cancel it. It's good to have some well managed credit and closing it will increase your debt utilsation when you apply for the mortgage. As suggested, better to use it a bit more in the run up to your mortgage app

Just_30

sfax wrote: »

If you had a balance outstanding on the card and therefore minimum payments, interest payments or just regular payments, it would impact on your affordability for the mortgage, but as you have an unused balance of £4k, I definitely wouldn't reduce it or cancel it. It's good to have some well managed credit and closing it will increase your debt utilsation when you apply for the mortgage. As suggested, better to use it a bit more in the run up to your mortgage app

Thanks sfax,

If and when I do use the card I have a Direct Debit to pay if off in full each month. With regard to using it a bit more, do you (or anyone else) have any suggestions on this? That is, should I be trying to use a certain percentage of the credit limit each month and then clearing it? Or, is it just a case of showing that the card is used, however small the transaction and then cleared in ful each month?

Maestro.

Keep it, and get a Visa card to complement the other two.

sfax

I think as long as it demonstrates a reliable payment history and you can see from looking at your credit report (which will show a sequence of balances on each statement) that it is being used, a small amount will be OK. In fact too large an amount, even if paid off in full every month can act against you because your credit report is only a snapshot and a lender will count the current month's balance as outstanding debt