Can I ditch my credit card?

jonnygee2

So I've had a credit card for the last 5 years. I've been using it to build a credit rating (cycling about 15% of the limit each month and paying it off to build up a 'credit history').

I don't really want one though. I find owning a credit card to be a source of stress. I'm always worried a direct debit won't come out etc and my credit rating will be hit or I'll get charged loads. It's also a pain to remember to use it, and I prefer spending on my bank card which lets me track my spending much easier.

I'm about to get a mortgage and my credit rating is very good (Experian '999/999'). Will having a mortgage and paying that off each month be enough to sustain my credit rating?

[Deleted User]

To an extent. But continued use of a card demonstrates an ability to handle short term credit and not overpay.

Remember that it's not about the pretend credit rating, but about how lenders view you.

A card also gives you section 75 protection, potentially cashback, increased savings interest and can be useful in emergencies.

If you have a full pay DD set up, you'll never get 'charged loads', even if they don't take it.

jonnygee2

A card also gives you section 75 protection, potentially cashback, increased savings interest and can be useful in emergencies.

I agree with this. I still think for me the pros are outweighed and ideally I wouldn't have one. The main thing is probably that I prefer to keep all my spending in one place, on one card. I use Monzo, I like the visibility and spending targets etc - it makes a huge difference to my ability to track my income and outgoings. I also have Yolt which tracks my credit card and Monzo balance, but it doesn't update instantly with spending. I appreciate there's a few extra pounds available through cash-back and interest, but I'm not a high earner. or spender so it doesn't tend to add up to much. In terms of emergencies, my cash savings are far larger than my credit limit, and my account has a (completely unused) overdraft too.

Generally my goal with my financial life is to prioritise simplicity and visibility over chasing every potential penny.

But continued use of a card demonstrates an ability to handle short term credit and not overpay.

This is what I was scared of. I really hate the feeling I'm being forced to use their products! But if I need to I will. The main goal is to make sure there's nothing to prevent me getting the best possible mortgage deal in another five years time.

[Deleted User]

jonnygee2 wrote: »

The main goal is to make sure there's nothing to prevent me getting the best possible mortgage deal in another five years time.

Then IMO you need to keep it open, even if you don't use it open.

As long as you've got the direct debit setup for full payment and use the card every 3 or 4 months, even if it's just for ONE drink/one shop/one meal out etc.

If you get rid of it, it sounds like you have very few other financial products - that'll make getting a mortgage harder as they have no proof of how you handle credit.

Use it at least once every few months - just to ensure the account isn't marked as dormant at the CRA, and the Direct Debit stays active (some banks cancel them if not used in ~13 months). Even just for a couple of quid.

If your savings are much more than your credit limit AND you have an unused overdraft, then there's nothing to worry about chucking £5 on it now and again? Even if you don't have visibility of that £5 for a while, it doesn't sound like you're strapped for cash.

Also I'd personally use a card for anything over £100 just for peace of mind (Section 75), but that's your call. They can be particularly useful Hotels, Car Hire, Plane Tickets etc where large holds can be taken.

Don't get me wrong, Monzo is great - and so is not having a reliance on credit, and not being bothered about chasing say 0.5% cashback like some of us - but if you want to be in the best position you need to show you have and use credit. A 5+ year old account, regularly used (even if for small balances) will look great for your mortgage app

jonnygee2

If you get rid of it, it sounds like you have very few other financial products

That's true I don't. Well, I have a mortgage now, but sounds like that's not enough.

but if you want to be in the best position you need to show you have and use credit

Point taken. I'll keep the damn thing then!

Also I'd personally use a card for anything over £100 just for peace of mind (Section 75)

Yeah I guess section 75 will be my consolation prize :j

System

jonnygee2 wrote: »

I don't really want one though. I find owning a credit card to be a source of stress. I'm always worried a direct debit won't come out etc and my credit rating will be hit or I'll get charged loads.

Get a card which rewards you for your spending, i.e one that gives you cashback. It is still worth keeping one purely for purchases of £100 or more so you benefit from Section 75 protection.

I've had credit cards for well over a decade, never known a direct debit not come out. I've even paid a couple of days late when I didn't do it on DD and forgot and they've understood it was a one off and no negatives on my file.