reducing credit card interest

shiwen55

Hi,


After a while, I was given Halifax master card, initially with low limit and higher category interest. My limit has gone up considerably after maintaining a good record, but the interest is still the upper rate.
I spoke with Halifax the other day with regards to interest rate and the call agent said I should close down accounts that I'm not using, so I did close few today.
My question is, does it really help credit file in such way that can reduce interest?
My first credit card was Aqua, after almost 10 years, started with a low limit and high interest, but this one after a year and half, limit has gone up and they just reduced my interest rate further, which is good news, but in letter from Aqua, they said they've been monitoring my file and it's good so they'd decided to reduce.


Thank you

[Deleted User]

It can, in theory. Higher available credit can mean more risk, which leads to higher rates. But having too little credit can have a similar effect.

However, clearing your account in full each month is the best way to get lower rates.

Which, ironically, means you won't even care about them.

Ben8282

If you had enough unused accounts that you were able to close 'a few' of them today, I can't help wondering why you were paying interest to Halifax. Why did you not simply start using the other accounts that you have now closed and repay them in full every month thus avoiding interest completely?
As to the advice you were given, I don't really think this was good advice to get your interest rate reduced. If you had wanted a credit limit increase and had lots and lots of unused credit then perhaps this would have been good advice.

shiwen55

Hi Ben,


They were 1x unused current account, 1x capital one card, 1x catalogue account, so I'm not missing that much with regards to interest.


I bank with Halifax and have 2 big chunks of overdraft, totaling £4,000 and a card limit of £10,000. I thought rather than paying high interest to catalogue guys or capital one, use my credit from Halifax, it's still less than the others.


Knowing I have built this much within 1 year an half, after years and I still have a satisfied CCJ and 2 defaults which are not paid on my file. (December 2018 I will be born again, hooray!!)


Thanks

Superscrooge

Have you tried the eligibility checker to see if you are likely to be accepted for a 0% BT card?

Even if Halifax reduce your interest rate to their standard rate of 18.9% It's still an expensive way to borrow money.

shiwen55

Hi,


I haven't spent much or any on Halifax. I think on top of my head I owe £400 !! So balance transfer is not an option now at least. I owe £250 on Aqua (reduced rate) and nothing else, not even used a penny of my overdraft


I was aiming to reduce the interest or maybe in future so I can spend on it, than taking a loan, a short home repair for instance.


So thought closing unnecessary account would help score then eventually reducing rate. Halifax is currently doing %6.0 something rate, but I will think about this and asking after December 2018 really.


Thanks

[Deleted User]

Don't confuse your score with your credit worthiness.

Superscrooge

shiwen55 wrote: »

Hi,


I haven't spent much or any on Halifax. I think on top of my head I owe £400 !! So balance transfer is not an option now at least. I owe £250 on Aqua (reduced rate) and nothing else, not even used a penny of my overdraft


I was aiming to reduce the interest or maybe in future so I can spend on it, than taking a loan, a short home repair for instance.


So thought closing unnecessary account would help score then eventually reducing rate. Halifax is currently doing %6.0 something rate, but I will think about this and asking after December 2018 really.


Thanks

If I have understood your situation correctly you have £650 CC debt?? The minimum BT amount is usually £100 It seems daft to be paying standard CC interest rates on this debt when it is possible to shift it to 0%

Another option is to concentrate on repaying the debt and apply for a 0% purchases CC that you can use for your house repairs and other expenses.

Ben8282

Unless you have a really low income. why are you paying interest on £400 and £250 balances? Can you really not afford to clear them each month and then use the cards for purchases which will be interest free as you are paying in full each month.

PeacefulWaters

Pay as much as you possibly can every month. Get the balances down to zero.

Best way to avoid interest is then to clear the balance fully after every statement.

StopIt

Ben8282 wrote: »

Unless you have a really low income. why are you paying interest on £400 and £250 balances? Can you really not afford to clear them each month and then use the cards for purchases which will be interest free as you are paying in full each month.

Exactly.


This is how you reduce a revolving credit balance without paying interest.


Balance of say £500 on CC 1 with Payment needed in 30 days before paying interest.


1: Spend £450 on CC 2 on every day items such as groceries and "normal" spending and save £50 of cash saved to reduce the balance month by month.


2: Pay CC 1 before required payment date.


3: Spend £400 on CC 1 as step 1


4: Pay CC 2 off and go to step 1.


End result? Near minimum payments being spent 100% on capital instead of interest.