Spend and pay in full vs. paying 0% cards - effect on credit history

cjv

Are there any benefits to doing one over the other in regards to improving my credit history?

I do currently spend on some of my cards each month and pay them in full, but these are cards I would like to now close down (credit builder cards, which have served their purpose).

I have long term 0% balances on 2 other cards with fixed amount DD's set up and was hoping this arrangement would be just as good as the spend and pay in full strategy.

I have no plans to spend/apply for more credit for several years now and I would like to trim down the amount of accounts I have, thanks

sourcrates

Hi,

There is no universal answer to this, it only matters should you want credit in the future anyway, and all lenders have different acceptance criteria, so there is no right or wrong answer.

Credit card companies entire reason for existence is to make money, if your not doing that for them, it may be viewed badly by some.

Personally if thats the only problem in your life your very lucky !!

cjv

Thank you sourcrates,

I will go ahead and close down some cards if the impact will be minimal. I am planning to save for a deposit to apply for a mortgage in 4-5 years, so I might go back to the spend and pay in full strategy closer to the time just to put some more shine on my credit history.

redux

Some people think it's worth having a card with long history, so maybe consider keeping one of the older ones.

cjv

Thanks redux. The cards I am going to close have only been open for about 6 months, so I should be ok on that front.

They did help me to build some credit history, then after a couple of defaults from my younger days fell off in April I was able to get myself some nice 0% cards.

Ben8282

You will be creating two different types of credit history.
Paying a card in full every month will show that you can be trusted to spend and pay and will probably assist you if your intention is to apply for a charge card.
Using and repaying 0% cards over time will demonstrate an ability to borrow and repay over time and will probably assist you in obtaining better 0% deals.
If you are actually doing both things at the moment that is probably good.
I would advise against closing the 6 month old accounts. This will not be good for the average age of your accounts on your credit files as the closed accounts will remain on your credit files with an account age of 6 months for the next 6 years.
I also believe that it is good to keep at least one card with a long history. I personally have 2 accounts opened in the 1980's and 1 account opened in the 1990's still active which does wonders for the average age of my accounts.
It would make sense to me to continue to use the cards for your purchases and continue to pay them in full every month, thus benefiting from the full 56 days interest free credit and keeping the money in your bank for longer, either to get interest on your money or else just to look good by keeping a higher balance in your current account. Also, even if you do make all your purchases in cash or by debit card, one day you may actually need to use a credit card (for a car rental perhaps?) and will then be in the position of having to use one of the cards with the 0% balance end up paying interest on your purchase.