Should I cancel these credit cards?

StMilMo

I've read a bit about this but I wonder what your thoughts are for my particular situation. I have four cards, with three different banks. Total balance is around 14k. They have sat at or very near "full" for a couple of years now, and all started life as 0% ones which I just ran on because I was making more money with my funds elsewhere than the interest was costing me on the cards. Rates are 18-26%

I have some cash now that I want to use to pay them off, and I would rather not cancel them so that that credit remains open to me in future if I want it. However, a few questions:

1) is there a chance the bank will cancel the card as soon as I pay it down? I have had a few missed payments here and there but no default notices. Might they just take the chance to close it down once I pay off the balance? Is it worth phoning them to ask if I can be assured this won't happen?

2) what is best for my credit rating, keeping all of that potential credit open (I have a further 35k of high-rate debt elsewhere) and reducing my % utilised, or just closing them down and then maybe being able to apply for new 0%'ers in future?

My finances are quite sound overall so the "stop yourself using them again" factors isn't important, but I'd like to do what's technically "best" still.

Thanks,

 

[Deleted User]

1) Possibly but unlikely, if you keep using it and paying off in full, they probably won't mention it. Possible they will reduce the limit based on a period finance review but unlikely they will close it
2) Keep them open - better to show stability and long term card use - you might even get new BT offers to get some of that other debt gone

Ebe_Scrooge

StMilMo said:

I've read a bit about this but I wonder what your thoughts are for my particular situation. I have four cards, with three different banks. Total balance is around 14k. They have sat at or very near "full" for a couple of years now, and all started life as 0% ones which I just ran on because I was making more money with my funds elsewhere than the interest was costing me on the cards. Rates are 18-26%

I have some cash now that I want to use to pay them off, and I would rather not cancel them so that that credit remains open to me in future if I want it. However, a few questions:

1) is there a chance the bank will cancel the card as soon as I pay it down? I have had a few missed payments here and there but no default notices. Might they just take the chance to close it down once I pay off the balance? Is it worth phoning them to ask if I can be assured this won't happen?  It's highly unlikely they'd close the accounts, though they may reduce the limits - but this can happen at any time.  You're infinitely better off to pay off the balance rather than be paying any interest.

2) what is best for my credit rating, keeping all of that potential credit open (I have a further 35k of high-rate debt elsewhere) and reducing my % utilised, or just closing them down and then maybe being able to apply for new 0%'ers in future?  In general you're better to keep the cards open, use them occasionally for a small amount just to keep them active.  Long-standing accounts are a positive tick on your credit history, and the available credit is not usually too much of a problem unless it's a huge amount.  Plus, if you close the accounts, it can look bad on your history - any future lender won't know if you closed them voluntarily, or whether the bank closed them due to "bad behaviour".

My finances are quite sound overall so the "stop yourself using them again" factors isn't important, but I'd like to do what's technically "best" still.

Thanks,

 

My thoughts in bold above.

blue.peter

1. If you keep a card ticking over, i.e., the occasional small transaction and pay it off in full each month, it's unlikely that the issuer will cancel it. (If you leave one unused for a long period, the issuer might mark it as dormant and then cancel it or not renew it. The meaning of "a long period" in this context will vary from one provider to another.)

2. It's generally regarded as a Good Thing to keep cards open and hence have a low utilisation.

If it was me, I'd keep the cards running. The risk, of course, is that you see all that available credit and use it, thus running yourself into debt. I note that you don't think that this will be an issue for you.

StMilMo

Thanks, guys - three concurring answers. Appreciate the advice; I will pay them down and leave them mostly inactive/small purchases and paid off each month.

Cheers,

StMilMo

Update: I paid them all down to £0 balance and one of them very quickly reduced my limit to £100 (from £4500), so effectively closing the card. That was Sainsbury's bank.

Can't blame them, I would have seemed like a risky customer the last few months and they got a few good years of interest out of me so time to call it.

Will report again if the other banks do similar.

tenchy

Don't close the Sainsbury's card. Let them keep servicing it - at their cost. Just use it for a small transaction every six months or so. Or if you really don't want to use it at all, then just abandon it - the cheeky gits, reducing the limit to £100!

[Deleted User]

tenchy said:

Don't close the Sainsbury's card. Let them keep servicing it - at their cost. Just use it for a small transaction every six months or so. Or if you really don't want to use it at all, then just abandon it - the cheeky gits, reducing the limit to £100!

Responsible lending, not cheeky. OP carrying 14k of debt paying 18-26% APR, the algorithms say they are struggling so reduce limit to stop them running up debt again. If they keep the £100 card and use it monthly (particularly if a nectar issue card) then Sainsbury's will probably put it back up again over time.

StMilMo

Yea, I won't cancel it. I think it was a fair decision on their part tbh, and I'll just keep it ticking over.

[Deleted User]

StMilMo said:

Yea, I won't cancel it. I think it was a fair decision on their part tbh, and I'll just keep it ticking over.

I'd either ask they increase your limit to something more usable or close it.

StMilMo

Update: one of the Tesco cards has just reduced my limit to £350 from £2700
Edit: and the Barclays as well.

So that's three out of the four. I will close the ones that reduce my limit. I've just paid off all of my other bank/OD debt so will let it all rest for a while, maybe refresh my score a bit.