Credit card limits and switching bank accounts

Erawan

Hi, sorry if this is not in the right forum, I wasn't sure where to post it to be honest because it covers a few areas (credit cards, bank accounts, credit rating).

Let me begin. Ok, from what I gather Martin and MSE are an advocates of ditching bank accounts when they don't pay anymore, e.g. when the interest rate drops or a better one comes along. Very much in the spirit of not necessarily having to stick with one bank for life and the much improved ease of switching accounts has helped this. However, what if you have built up your credit card limit with that account/bank? Is it still advisable to shut up shop and start again? You'll be starting at square one with your credit card limit, right? Or would it be more advisable to have two bank accounts, but the original one is kept solely for the credit card and credit limit you have built up?

Anyone have any input or insight on this? It would be much appreciated.

Archi_Bald

Unless your credit card pre-reqs a current account, you can treat them as two totally different things. You don't have to have your credit card with your current account provider.

If you need or want to keep your existing current account, you can still apply for one or more additional current accounts elsewhere. You would have to move your DDs and SOs yourself, and give your new bank details to everyone who sends you money. That's easy enough to do. Your new current account provider would, of course, not pay you a switch bonus as you haven't actually switched.

I doubt a current account application will have a huge impact on your credit worthiness.

Aquamania

Erawan wrote: »

Hi, sorry if this is not in the right forum, I wasn't sure where to post it to be honest because it covers a few areas (credit cards, bank accounts, credit rating).

Let me begin. Ok, from what I gather Martin and MSE are an advocates of ditching bank accounts when they don't pay anymore, e.g. when the interest rate drops or a better one comes along. Very much in the spirit of not necessarily having to stick with one bank for life and the much improved ease of switching accounts has helped this. However, what if you have built up your credit card limit with that account/bank? Is it still advisable to shut up shop and start again? You'll be starting at square one with your credit card limit, right? Or would it be more advisable to have two bank accounts, but the original one is kept solely for the credit card and credit limit you have built up?

Anyone have any input or insight on this? It would be much appreciated.

Whilst Martin may advocate the ditching & switching of bank accounts, and it certainly makes sense if it is a deposit/savings account that pays poor interest rates (not to mention the nice little earner MSE will make on it too if you switch to an account they recommend via one of their special links )

... I don't think Martin advocates the ditching of credit cards you have held for a long poeriod and built up a nice large credit limit on

That's because Martin advocates paying credit card bills IN FULL and ON TIME every month!

(and that's usually how you get a nice large credit limit eventually)

That makes the interest rates charged a mute point (but to be honest, if you have held a credit card for a long time and built up a large credit limit, chances are the interest rate is pretty low in comparison anyway anyway)

If you need to borrow money, credit cards are not usually the best way to do so as they are very expensive (unless you get a 0% deal, and they usually only last 1-2 years)


Edit:
Hmmm...another newbie who left as soon as they posted :cool:

Erawan

Thanks for the responses guys, very helpful.

Lol, I would say it's a little premature to say that I have left already. I didn't think I would get responses so quickly. Thanks again.

EssexExile

I've had the same credit cards for years with generous credit limits (well I think they're generous!). I took out a Santander 123 card recently & the credit limit is in the same region as my other cards.

pinnit2014

Do the card companies like you paying on full each time? Would they not prefer to have the debt rolling and attracting interest and still being paid? I remember having an MBNA card and prior the end of the 0% period i paid it off and had a credit limit decrease from £3,500 to £200 :-/ the following month...aka, you're not wanted here.

EssexExile

I don't know about policy, others here may, but my credit limits are about £6000 on all my cards & I always pay them off in full.

Aquamania

Erawan wrote: »

...Lol, I would say it's a little premature to say that I have left already. I didn't think I would get responses so quickly. Thanks again.

At which point, said user again made a sharp exit :cool:

Erawan

:wave:

@pinnit2014

That seems extraordinarily punitive. I did read (might have been MSE, might have been another site) that they (the banks) would prefer it if you didn't pay it all off and that you just paid the minimum and never missed a payment, that way they can make money off of you. Though a different article said you shouldn't just pay the minimum as it makes you appear to be a liability with regards to handling your finances. You can understand why some of us get confused as to what/who to believe.

Buzby

MBNA are not really a bank but a lender with a no other reason but to lend you money using their affinity cards. A proper bank will not usually care, but one who's business is to maximise their income from people unable to contain their excesses - and the penalty is a reduced credit limit.

jamesd

Erawan wrote: »

However, what if you have built up your credit card limit with that account/bank? Is it still advisable to shut up shop and start again? You'll be starting at square one with your credit card limit, right? Or would it be more advisable to have two bank accounts, but the original one is kept solely for the credit card and credit limit you have built up?

A bank in theory can look at your whole current account picture to help set an internal score. In practice the card part of the business may ignore that and look at just your credit card usage.

It is not a good idea to stick to a card from just your bank. It is better to have at least one card that is completely unconnected to the place where you have your main current account, so troubles with them or their systems will have no direct effect on your card use. A safety feature.

It is not necessary to have one of any of these things. I have four current accounts with three banks and seven credit cards with five card issuers. I use the cards for stoozing as well as on different cards, spending. The current accounts are a reliable long term one, one that is part of an offset mortgage and one that pays me to have bills paid from them as well as paying decent in-credit interest.

Using the card and using close to the full limit is useful to get limits increased. It costs card issuers money in the form of provisions for possible use to have a credit limit so they have a small but present incentive not to have large but unused limits and not to offer limits that will not be used. This isn't a reason to pay substantial amounts of interest but a little occasionally could be useful if you will get real value from a higher limit, like with stoozing. But stoozing itself uses a lot of the limit so it's not really necessary if you're doing that.