0% Spending Card - What happens after?

[Deleted User]

Hi All, 
I've just applied for my first 0% spending credit card and currently awaiting it to arrive in the post.
I've done much research prior to getting a credit card but cannot seem to find an answer for my following question.
What is the best option once the 0% interest period runs out? Is the best option to close the card or do a balance transfer to another 0% credit card? Bearing in mind I will always clear the amount before the 0% period ends. Do any of those options affect my credit score i.e. closing a card and/or continuously applying for a 0% credit card after the period ends as usually they are around 18 months. I am looking to improve/maintain my credit score without damaging via multiple applications or closing cards. 
Hope this makes sense!
Thanks

jay1804

Depends on what your goal is.

If you have a couple cards already, then you can close it after the 0% period - Once it's been closed for around 6 months your usually a 'new customer' which means you can get new customer deals. Another option is to keep the card open - If the lender allows multiple cards this can be good, as you can apply for another card and consolidate the limits together.

Sandtree

"Credit Scores" are a marketting gimmick that no lender ever sees. Applications, closing accounts, opening new accounts, outstanding balances etc are all shown on your credit history which is what lenders will use to determine if to lend to you or not. Some will have positive impacts, some negative but most come into the category of "it depends" as credit decisions consider multiple factors simultaneously.

If you can afford to pay the card off in full before the end of the promotional period and your monies are not making significant returns then clearly its better to pay it off. If the money is invested and making large returns then clearly the transfer fee is better and maintaining the 0% debt interest and positive interest on the savings. These days it'll probably be the minority where savings are earning more interest than fees.

[Deleted User]

Thanks for your response!
This is my first credit card so I will just have this one open for now as I'm aware that applying for many in a short space of time negatively impacts your credit score. So, I'm looking to utilise this one by supporting everyday purchases to maintain/build my credit score and have 0% interest spending on larger purchases (not looking to max the card out - will utilise at 30%).

So at the end of every 18 months (standard 0% interest period) I will be looking to renew the 0% period by balance transfer or closing and opening another card. But, don't want to be closing cards after every 18 months and re-applying if that will negatively affect my score and wondering if there is a better or more efficient way of doing it?

[Deleted User]

Again - ignore your score.

There's rarely any need to close old accounts.

[Deleted User]

Sandtree said:

"Credit Scores" are a marketting gimmick that no lender ever sees. Applications, closing accounts, opening new accounts, outstanding balances etc are all shown on your credit history which is what lenders will use to determine if to lend to you or not. Some will have positive impacts, some negative but most come into the category of "it depends" as credit decisions consider multiple factors simultaneously.

If you can afford to pay the card off in full before the end of the promotional period and your monies are not making significant returns then clearly its better to pay it off. If the money is invested and making large returns then clearly the transfer fee is better and maintaining the 0% debt interest and positive interest on the savings. These days it'll probably be the minority where savings are earning more interest than fees.

This is helpful thank you, I never looked at it in the way that your 'credit history' is actually what matters. So then, would applying for a balance transfer every 18 months (when 0% period ends) be a negative factor as this is a hard search?

[Deleted User]

Deleted_User said:

Again - ignore your score.

There's rarely any need to close old accounts.

Ok thanks, advice noted re: 'Credit Scores'. Just, after the 0% period ends I will not be using that card again to avoid the hefty interest but by not closing old accounts will eventually end up with numerous credit cards - which again isn't this a negative factor having loads of credit cards open at once?

[Deleted User]

No. Keep them open, use occasionally to keep them active.

Closing all your accounts is a negative factor, as it indicates that lenders no longer trust you.

Sandtree

23HomeRenovation said:

 But, don't want to be closing cards after every 18 months and re-applying if that will negatively affect my score and wondering if there is a better or more efficient way of doing it?

As already said... its complicated.

Lenders like to see that other lenders trust you... so having other credit lines open and well managed is a positive sign but they also have to consider if they did offer you a new line of credit could you still afford everything if you maxed out both your existing card and the new card they give you? So this is where other factors start coming in like your income, rent/mortgage etc etc if they think you can still afford it all comfortably then the open account is a benefit... if they think you'd struggle they may decline or offer a low limit in which case the old open account is a potential detriment. 

Many people have multiple accounts open at any one time; its not very common to get repeat offers on open accounts and so that could be another reason why you may want to close an account rather than keep it open (to become eligable for new customer promotions again in the future).

What adds the cherry on the top of it all is that every lender is different... almost none are going to like someone with a lot of defaults but Natwest may be comfortable with people carrying a 50% utilisation rate whereas AmEx may say thats an instant no for them... the probably is they dont "say", their underwriting criteria are highly commercially sensitive and arent publicly available. 

[Deleted User]

23HomeRenovation said:

Deleted_User said:

Again - ignore your score.

There's rarely any need to close old accounts.

Ok thanks, advice noted re: 'Credit Scores'. Just, after the 0% period ends I will not be using that card again to avoid the hefty interest but by not closing old accounts will eventually end up with numerous credit cards - which again isn't this a negative factor having loads of credit cards open at once?

You don't pay interest if you pay the card off in full every month, once the 0% offer has ended, using the card every month and paying in full will make sure your credit record looks good to future lenders say if you wanted a car loan, mortgage etc. You also benefit from section 75 protection. Don't mix the spending and 0% card though, clear the spending first.

[Deleted User]

@Deleted_User - Ohh.. thank you! This is really helpful. I thought once the 0% interest period was over the card was essentially useless going forward but not necessarily the case for those on top of their finances. Thank you thank you thank you!