Should I close my credit cards?

SB160276

Hi all,

Should I close all my credit cards?

I am currently paying a number of credit cards (9!) on a monthly basis and making slightly more than the minimum payments on each. These have built up out of habit, lack of control and generally a lack of attention to the issue, along with being lured into 0%APR deals.
I have not missed any payments but I don't have any disposable income left once I pay them each month. I am aware a number have very high APRs (35-40%) so I decided to apply to my bank for a loan to consolidate and clear them (and close them).

They declined, explaining that as I am still using the cards they don't think I can manage without them. My budget says I can if I am strict with my spending, the trouble is, I have poor self control and tend to spend more out of habit than anything because I have them!

They said if they see no spending on the cards for 6 months and I manage my current account well (I already do) they would give me the loan. This will enable me to pay it all off with a reasonable APR in a fixed time period.

I know that having a high outstanding-balance-to-credit-limit ratio is a negative indicator, but would it be worse to close them all so I cannot spend on them, and then just start paying them down? Would this impair my credit file in some way (for example, high debt with zero available credit)?

Thanks for reading!

Rags2riches

Immediately cut them up. Treat them like a loan.

Spending only from your debit account?

Your first mission is to reduce those high APR's. You could ask for a better rate from your lenders, or try to find new ones which offer 0% on balance transfers.

datlex

Cards should always be a means of payment not a source of funds. If you use them as a source of funds get rid.

kram

Hi SB160276,

You are quickly running out of options, I would post your SOA here so people could give some advice?

Here's the link:

http://www.stoozing.com/calculator/soa.php

I would also look at the debt remedy tool on the stepchange website, its anonymous with no commitment.

Good luck

K

SB160276

Hi
Thanks for the info so far. My mian question hasn't been clarified yet though - I know I can cut the cards up, but will closing the cards before paying them down negatively affect my credit position?
Please see below my SOA.
I have excluded my wife's income but she covers anything essential that isn't listed below. As a part time worker (not able to change this at present) she spends what she earns.
Statement of Affairs and Personal Balance Sheet

Household Information
Number of adults in household........... 2
Number of children in household......... 2
Number of cars owned.................... 1

Monthly Income Details
Monthly income after tax................ 2840
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 2840

Monthly Expense Details
Mortgage................................ 0
Secured/HP loan repayments.............. 182.5
Rent.................................... 550
Management charge (leasehold property).. 0
Council tax............................. 149
Electricity............................. 58
Gas..................................... 50
Oil..................................... 0
Water rates............................. 104
Telephone (land line)................... 19 (need this for the internet)
Mobile phone............................ 116 (this is 4 contract mobiles for the family on reasonable tariffs)
TV Licence.............................. 12.12
Satellite/Cable TV...................... 35 (intend to cancel this but can't until December)
Internet Services....................... 20
Groceries etc. ......................... 100 (Wife pays the rest)
Clothing................................ 0 (Wife pays)
Petrol/diesel........................... 0 (Wife pays)
Road tax................................ 18.37
Car Insurance........................... 25.5
Car maintenance (including MOT)......... 16.97
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 0 (Wife pays)
Medical (prescriptions, dentist etc).... 0 (Wife pays)
Pet insurance/vet bills................. 32.87
Buildings insurance..................... 0
Contents insurance...................... 12.15
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 0 (Wife pays)
Haircuts................................ 0 (Wife pays)
Entertainment........................... 0 (Wife pays)
Holiday................................. 250
Emergency fund.......................... 0
Total monthly expenses.................. 1751.48


Assets
Cash.................................... 0
House value (Gross)..................... 0
Shares and bonds........................ 0
Car(s).................................. 3500
Other assets............................ 0
Total Assets............................ 3500


Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 0........(0)........0
Hire Purchase (HP) debt ...... 3651.....(182.5)....0
Total secured & HP debts...... 3651......-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
Halifax Loan...................3934.09...229.8.....16.9
Halifax Credit Card............2290.56...60........17.95
Virgin Credit Card.............6025.82...142.5.....16.62
DFS Sofa.......................767.87....24.77.....0
Co-op Overdraft................187.42....10........0
Argos Storecard................391.63....20........29.9
Capital One Credit Ca..........1356.2....61........35
Nationwide Credit Car..........1149.27...30........19.9
Lloyds Credit Card.............1398.81...25........25.95
Tesco Credit Card..............1717.19...50........26.69
Aqua Credit Card...............2024.31...60........34.9
First Direct Credit C..........2989.32...100.......18.9
Vanquis Credit Card............2956.91...124.4.....39.9

kram

If you cancel your cards the banks will still want their money so they would want some kind of repayment plan in place which would be recorded onto your credit file.

K

SB160276

Thanks for the reply. That was my concern so I'll stick with the cutting them up option.

EssexHebridean

If you close the accounts I'd suggest that there is a decent chance that the card companies would simply want their money back straight off, so cut them up, and don't apply for any more currently unless you can get accepted for any 0% BT cards (but bearing in mind the rates you say you've been getting, my guess is this is doubtful?

Comments on SOA in red...

SB160276 wrote: »

Hi
Thanks for the info so far. My mian question hasn't been clarified yet though - I know I can cut the cards up, but will closing the cards before paying them down negatively affect my credit position? Until you get your spending habits and your budget under control view your "credit position" as unimportant - the very last thing you need at this stage is further credit!
Please see below my SOA.
I have excluded my wife's income but she covers anything essential that isn't listed below. As a part time worker (not able to change this at present) she spends what she earns.
Statement of Affairs and Personal Balance Sheet

Household Information
Number of adults in household........... 2
Number of children in household......... 2
Number of cars owned.................... 1

Monthly Income Details
Monthly income after tax................ 2840
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 2840

Monthly Expense Details
Mortgage................................ 0
Secured/HP loan repayments.............. 182.5
Rent.................................... 550
Management charge (leasehold property).. 0
Council tax............................. 149 Split this over 12 months rather than 10 if you've not already done so - it makes budgeting easier.
Electricity............................. 58 Check regularly to make sure you're on the cheapest deal you can be. Make sure you don;t use more than you have to - so have a "lights off when you leave the room" rule, turn off stuff left on standby unless it needs a connection,
that sort of thing.
Gas..................................... 50 As above re checking on tarrifs etc - plus turn the thermostat down a couple of degrees and put a jumper on.
Oil..................................... 0
Water rates............................. 104 Ouchy - are you in the South West by any chance? If so switching to a meter might help - at least then you can put steps in place to keep a check on what you use. If you are already metered then make sure people aren't leaving taps runing while teeth-cleaning or washing up, only run washing machine/dishwasher when full etc.
Telephone (land line)................... 19 (need this for the internet) Can you get it cheaper though? have you checked?
Mobile phone............................ 116 (this is 4 contract mobiles for the family on reasonable tariffs) even for 4 mobiles the tariffs aren't that reasonable - you're overpaying. Look at SIM only deals as soon as the ends of the contracts approach - good SIM only deals with plenty of data can be had for £10 a month upwards. Are either of the children old enough to start contributing to the cost of theirs?
TV Licence.............................. 12.12
Satellite/Cable TV...................... 35 (intend to cancel this but can't until December)
Internet Services....................... 20 Shop about - you can probably get this cheaper
Groceries etc. ......................... 100 (Wife pays the rest)
Clothing................................ 0 (Wife pays)
Petrol/diesel........................... 0 (Wife pays)
Road tax................................ 18.37
Car Insurance........................... 25.5
Car maintenance (including MOT)......... 16.97 Where do you put this aside? You're not showing any cash assets? Also does it actually cover the cost of your annual servicing, MoT, tyres etc?
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 0 (Wife pays)
Medical (prescriptions, dentist etc).... 0 (Wife pays)
Pet insurance/vet bills................. 32.87
Buildings insurance..................... 0
Contents insurance...................... 12.15 Shop around to see if you can shave a bit off this
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 0 (Wife pays)
Haircuts................................ 0 (Wife pays)
Entertainment........................... 0 (Wife pays) You never pay out anything in this category at all? Not a chocolate bar at the petrol station, a quick coffee on the way to work,
a drink after work with colleagues?
Holiday................................. 250 Where do you save this? You've not showing any cash assets? In any event I'm inclined to say that you can't really Justify £3,000 a year ion holidays at the moment?
Emergency fund.......................... 0Divert £100 of the money you intend setting aside for holiday costs until the emergency fund has £1,000 in it - that's more of a priority than holidays at the moment
Total monthly expenses.................. 1751.48


Assets
Cash.................................... 0
House value (Gross)..................... 0
Shares and bonds........................ 0
Car(s).................................. 3500
Other assets............................ 0
Total Assets............................ 3500


Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 0........(0)........0
Hire Purchase (HP) debt ...... 3651.....(182.5)....0
Total secured & HP debts...... 3651......-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
Halifax Loan...................3934.09...229.8.....16.9 Is this by any chance a loan from where you've consolidated debt before?
Halifax Credit Card............2290.56...60........17.95
Virgin Credit Card.............6025.82...142.5.....16.62
DFS Sofa.......................767.87....24.77.....0 Genuinely on 0% finance?
In future save before purchasing stuff like this - this is where an emergency fund may help too
Co-op Overdraft................187.42....10........0 Fee-free overdraft? No charges at all?
Argos Storecard................391.63....20........29.9 Ouch - storecards are evil -
cut it up and see comments above on emergency funds being useful.
Capital One Credit Ca..........1356.2....61........35
Nationwide Credit Car..........1149.27...30........19.9
Lloyds Credit Card.............1398.81...25........25.95
Tesco Credit Card..............1717.19...50........26.69
Aqua Credit Card...............2024.31...60........34.9
First Direct Credit C..........2989.32...100.......18.9
Vanquis Credit Card............2956.91...124.4.....39.9

OK - you've cut the bit showing the surplus off the bottom but looks like roughly £150 a month you should have left? Do you have that amount left over? If not you need to work out where it's going and make sure that it IS left over from here on.

Re-set all your CC payments from the "minimum payment" option to the amount you're p[aying right now, rounded up to the next £1 - so if you're paying £24.77 per month, set your payment to £25 - this means that the payments don't fall over time but as you're covering them anyway that's OK. Do NOT USE THE CARDS once you've done this though - that way lies disaster.

Target the highest interest rates first - divert every spare penny you can scrimp from other spending towards the most expensive debts. I'd also think about getting shot of that overdraft if I were you - OD's are what I call "dangerous debts" as they can be recalled at any time. As you pay off a card close the account to avoid risk of temptation - for that very reason I'd get that Argos card gone as a priority I think.

The key areas I can see that you can save are holidays (If the kids are old enough to both have mobiles then they're probably approaching the age when going away with Mum & dad is seriously uncool anyway so this may not be as hard as you think!) Budget a small amount under entertainment for a "staycation" doing things from home too - maybe make that spread over a few long weekends through the year to give yourselves regular breaks from work. That 3k you're currently budgeting for holidays though - that sum of money knocks that hideous 39.9% Vanquis card on the head over 12 months, think about it that way.

SB160276

Hi, and thanks for your reply.

Good idea re the council tax. I'll see if I can do this.

I've checked the gas and electric but not the phone. I'm stuck with the phone and internet until next June but will look then.

RE water, yes I'm in the SW and it is metered. We do use a fair bit (teenage kids!) but try to be careful. I have seen it drop from around £120/month over the past 6 months and am taking reads to ensure it's accurate.

Car maintenance is paid direct to the garage monthly and covers everything but tyres and unexpected costs.

Entertainment, you're right I am left with around £150 a month and this is probably where that cash is going - I guess I'm just not tracking it...

Holiday money is paying off a committed holiday which in hindsight was a stupid decision; but its done now so need to put up with it until May. Once it's paid off though, that will become free cash.
Emergency fund - I've never done this because I've always read its better to pay your debts first.

The Halifax loan was previous consolidation from some cards and a car which we had to fund. I was also on a lot less money so cards were used for funds.
The Dfs is 0%
Co-Op probably isn't but it's a small amount so I've not been overly worried about it.

It's really gutting to realise the impact of your comment re Vanquis...
I guess there's a number of things I need to do to sort it out! :eek:

EssexHebridean

In red again then...

SB160276 wrote: »

Hi, and thanks for your reply.

Good idea re the council tax. I'll see if I can do this.

I've checked the gas and electric but not the phone. I'm stuck with the phone and internet until next June but will look then.

RE water, yes I'm in the SW and it is metered. We do use a fair bit (teenage kids!) but try to be careful. I have seen it drop from around £120/month over the past 6 months and am taking reads to ensure it's accurate. Shower timer, brick in the cistern, a sign over the sink saying "Turn off the tap", try washing up in less water - reduce to half a bowl. Save "grey"
water for watering plants etc, lots of other tips for saving water too - have a look at your water company's website.

Car maintenance is paid direct to the garage monthly and covers everything but tyres and unexpected costs. So you need to budget a further sum for tyres and the unexpected stuff then - and set that aside monthly in a dedicated savings account which is JUST for car stuff. If you don't need it all then any surplus will cover paying car tax annually next year, maybe?

Entertainment, you're right I am left with around £150 a month and this is probably where that cash is going - I guess I'm just not tracking it... Spending diary... starting today

Holiday money is paying off a committed holiday which in hindsight was a stupid decision; but its done now so need to put up with it until May. Once it's paid off though, that will become free cash.
Emergency fund - I've never done this because I've always read its better to pay your debts first. The EF is the exception to this - having one means that when the kettle breaks, or a towel goes in holes, or someone manages to tear their good coat - you can pay for it not put it on a card.

The Halifax loan was previous consolidation from some cards and a car which we had to fund. I was also on a lot less money so cards were used for funds. OK - so here in lies the reason why under NO circumstances should you consolidate again - yes? It didn't work first time, and the very fact that you're in further problems now means it wouldn't work this time either. Now project forwards where you might find yourself in a few years if you DO consolidate again without fixing the problem...
The Dfs is 0%
Co-Op probably isn't but it's a small amount so I've not been overly worried about it. Start worrying then. Find out what you're being charged and then look to stop using the OD facility.

It's really gutting to realise the impact of your comment re Vanquis... Good -
it's realisations like that which will motivate you to get things sorted.
I guess there's a number of things I need to do to sort it out! :eek:

There is - and here's another figure for you - that £150 surplus that you don't have currently - that's £1800 a year you can track down...or in other words - that Tesco card gone inside 12 months, taking it's 26.69 rate with it...

Some tips:
Start thinking ahead
Stick to your budget
Learn the art of saying "Nope, I don't need that so we won't be buying it"
Start to think of yourself as being someone who is in control of their income, not someone who is controlled by it.

You can fix this, and relatively quickly in comparison to some. The holiday is a bit of a pain though - definitely no way you can get out of it/reduce costs etc? If not fair enough, just make sure you extract every last penny of value from it!

SB160276

Thanks again. I have cut up all my cards today so I can't use them again now.