Advice sought from Credit and Saving guru's...

samsam89

Apologies if this is a typical question you all see on here several times a day. Just after a little advice.

I currently have 2 credit cards in my name.

The first is a Halifax CC that I've had for a little over 2 years. It had around £1500 on it when I decided to switch to a 0% balance transfer with HSBC (who I bank with). Once I switched the balance to the HSBC one, I used it some more and the balance was around £2350.

I suspect I was a little naive as I had a healthy amount in savings so recently decided that I'd pay £2000 off, leaving around £350. I could clear that but it would again dent my savings and I'm thinking it's not a great deal of money to just pay gradually?

My other half has suggested that I just clear the £350 and cancel the two credit cards altogether, then take out a John Lewis Partnership card, use that and pay it off in full every month (what she currently does). It's helpful for it to be a JL card as I work for them, almost always shop in Waitrose branches and my partnership discount automatically gets deducted from the card, plus you earn points for vouchers etc.

So my question is, would it be sensible to cancel the 2 cards in my name and open up a fresh one or would that damage my credit rating? I'd rather not have 3 credit cards in my name as I wouldn't be using 2 of them at all. I also have my car on finance so I don't feel too comfortable about having lot's of areas of potential credit sitting there.

Advice?

grumbler

'Naive' is a too mild word for a person paying pretty high interest on £1500, then on £850 while having 'a healthy amount in savings'. And what's point in leaving £350 unpaid now unless it's at 0%?
Your wife is much wiser if she pays her CC in full every month.

MSE article: Repay Debts or Save?

Re the credit rating, I don't see how paying of the old cards, closing them and getting a new card can damage it. I think it's worth getting the new card first, then close the old ones or just stop using them.

redpete

samsam89 wrote: »

The first is a Halifax CC that I've had for a little over 2 years. It had around £1500 on it when I decided to switch to a 0% balance transfer with HSBC (who I bank with). Once I switched the balance to the HSBC one, I used it some more and the balance was around £2350.

Is that £2350 in total across the two cards or is it £2350 with Halifax plus most of the £1500 on the HSBC?

I suspect I was a little naive as I had a healthy amount in savings so recently decided that I'd pay £2000 off, leaving around £350. I could clear that but it would again dent my savings and I'm thinking it's not a great deal of money to just pay gradually?

You are still paying a large amount of interest on the £350 on the CC and earning a small amount of interest on the £350 in savings.

So my question is, would it be sensible to cancel the 2 cards in my name and open up a fresh one or would that damage my credit rating? I'd rather not have 3 credit cards in my name as I wouldn't be using 2 of them at all. I also have my car on finance so I don't feel too comfortable about having lot's of areas of potential credit sitting there.

Advice?

It seems a good idea to cancel the HSBC. Careful about opening another CC without doing something to address the spending habit that's meant you need to dip into savings to pay off the CC balance.

Why are you worried about your credit rating? The loan should show you can handle repaying a loan, regular use of a credit card (paying it off in full each month) would show you can handle a CC.

samsam89

redpete wrote: »

Is that £2350 in total across the two cards or is it £2350 with Halifax plus most of the £1500 on the HSBC?
You are still paying a large amount of interest on the £350 on the CC and earning a small amount of interest on the £350 in savings.


It seems a good idea to cancel the HSBC. Careful about opening another CC without doing something to address the spending habit that's meant you need to dip into savings to pay off the CC balance.

Why are you worried about your credit rating? The loan should show you can handle repaying a loan, regular use of a credit card (paying it off in full each month) would show you can handle a CC.

It all started because I received a large court fine a few years ago and didn't have the savings to pay it, and I just ended up having to sling a few more of the big purchases on there as I couldn't pay them up front at the time.

I had the Halifax card with £1500 on it. I transferred the £1500 to HSBC and then ended up having to put my yearly car insurance on it Which took it to £2350.

I now have a Halifax CC with nothing on it and £350 left on the HSBC one as a couple of weeks ago I paid £2k off from my personal savings.

samsam89

grumbler wrote: »

'Naive' is a too mild word for a person paying pretty high interest on £1500, then on £850 while having 'a healthy amount in savings'. And what's point in leaving £350 unpaid now unless it's at 0%?
Your wife is much wiser if she pays her CC in full every month.

MSE article: Repay Debts or Save?

Re the credit rating, I don't see how paying of the old cards, closing them and getting a new card can damage it. I think it's worth getting the new card first, then close the old ones or just stop using them.

Just don't want to have too many applications on my file and I just assumed that applying for a 3rd credit card would do just that.

grumbler

Applications (credit searches) remain in the file for a year, and normally are ignored by lenders after about 6 months.

Tixy

samsam89 wrote: »

Just don't want to have too many applications on my file and I just assumed that applying for a 3rd credit card would do just that.

What other recent credit applications have you made?
A single application will have very little impact on your credit file.

I would
-Pay off the debt.
-Close one card (probably HSBC as you haven't held it as long as the other).
-Try applying for the JL card.

If accepted and if you start using the JL card regularly then set up a DD to repay in full each month.

Keep the other card for emergencies (you may want to occasionally buy something on it and repay when the statement arrives to minimise the risk of it being closed due to inactivity).

samsam89

Tixy wrote: »

What other recent credit applications have you made?
A single application will have very little impact on your credit file.

I would
-Pay off the debt.
-Close one card (probably HSBC as you haven't held it as long as the other).
-Try applying for the JL card.

If accepted and if you start using the JL card regularly then set up a DD to repay in full each month.

Keep the other card for emergencies (you may want to occasionally buy something on it and repay when the statement arrives to minimise the risk of it being closed due to inactivity).

Just one for an HSBC loan, to basically pay off the remainder of my car, thus creating a smaller repayment per month and less time until it's paid off. They offered 9.9% which I obviously didn't take up.

That's the only one in the last 6 months and as far as I can remember only 2 in the last 12 months, perhaps 3.

SuperHan

No harm in having the three cards open. I have a couple that I never use, but may be helpful in an emergency, and still get accepted when I apply.

Some people say there are issues with available credit vs salary, but I have available credit of over £16,000 (over 4 credit cards, 1 catalogue account and 5 overdrafts), all of which are paid off at the end of each month. I also have two outstanding interest free finances, and just last week opened a Halifax credit card with a limit of £5,000 - all against a £22k salary, so if you ask me, there's not a huge issue in having a lot of credit accounts open!

But the advice of your OH is very good. It'll save a lot in interest too!