Credit Card Question

abaka

Hi,

I'm attempting to get myself out a pretty heavy debt situation.  At this point I'm manageable, as in I can afford all my monthly payments, I haven't missed a payment and in many of the cards I'm paying off much more than the minimum each month. However the issue has been that on one of my cards I've been spending quite high and in some months, I've actually spent just as much as I've paid off which isn't sustainable.

My question is I have 8 Credit Cards plus PayPal Credit with an available balance of 43,800.  I'm currently using around 22,374 of this credit.  However I have 3 cards with 0 balance.  I've regularly had a lot of cards so as to eventually transfer balances to save on interest....However I realise I've fallen into the easy trap of never really touching the legacy debt and still wracking it up and none of the current lenders are even offering me balance transfer offers at this point.

My question is should I close these empty accounts (I don't spend on them and don't even have physical cards as they were destroyed as soon as they came in so I'm not tempted to spend on them.  However I wonder if closing them may well increase my chances of getting offers off credit such as balance transfers again...But I wonder, closing them means my overall credit utilisation will rise to nearly 100% which I think is a lot worse than having dormant accounts...

I'm fairly certain I can wipe off at least 4-5000 of the debt within 6 months between cutting out necessities and selling unused items I've collected which are nice to have but being debt free would be even nicer and I plan to be completely credit card debt free within 24 months.

Thanks for reading.

[Deleted User]

Unless you can't control your spending, leave them open. 

Don't use a card with a balance for your regular spending, especially if interest bearing. Use an empty one and clear in full each month.

abaka

Thanks - I'm going to stop using the credit cards altogether.  I'm just wondering would closing some of the inactive ones for 6 months though increase my chance of getting a balance transfer offer with another provider down the line.

Only one of my card charges interest but it's a low balance and the interest isn't an issue.  I'm more concerned with my highest card which is around 4900 and the 0% on that ends in Feb 23. So I'd be keen to get that down before then.

AT 43,000 I must be at the max amount of credit I can be offered and wondering would freeing up that credit help me secure offers with other card providers.

Emmia

Closing the cards will increase your utilisation, i.e. the value of debt vs your total credit availability (at the moment you're at just over 50%)  which may reduce your attractiveness to lenders, rather than opening up offers.

Minimum payments only (even if on only one of the cards, and occasional) also make you less attractive as you're seen as having difficulties with your debt levels...

TadleyBaggie

By closing the unused cards, and hence reducing your total credit limit, you would increase your utilisation percentage significantly. This could affect your chances of further credit.

abaka

Thanks - I'll keep them going in that case.

Going to be a rough/bumpy 2 years but I can get through this and come out the other end stronger!!

Brie

I find that some cards never or very very rarely offer BTs.  I would suggest you use one of those for your spending if you must. 

I've never understood the logic of how getting rid of available credit makes you less attractive for offers - I suspect the various algorithms the banks employ decide but I would have thought someone with £43k+ credit available is a scarier prospect than someone with £30k.  But I am not a bank!

As for clearing things - I'd nuke the smallest debt just to get it out of the way and then pay a set amount to the others just above the current minimum and throw everything else at the one with interest being charged.  That way you'll have both sense of accomplishment and get rid of the debt quickest.  Check the minimum required every couple of months and revise the payment amounts to throw even more at the interest bearing one.

abaka

Brie said:

I find that some cards never or very very rarely offer BTs.  I would suggest you use one of those for your spending if you must. 

I've never understood the logic of how getting rid of available credit makes you less attractive for offers - I suspect the various algorithms the banks employ decide but I would have thought someone with £43k+ credit available is a scarier prospect than someone with £30k.  But I am not a bank!

As for clearing things - I'd nuke the smallest debt just to get it out of the way and then pay a set amount to the others just above the current minimum and throw everything else at the one with interest being charged.  That way you'll have both sense of accomplishment and get rid of the debt quickest.  Check the minimum required every couple of months and revise the payment amounts to throw even more at the interest bearing one.

That is what I'm doing.  paying minimum payment on 2 and paying a few quid above the minimum on the rest apart from my smallest debt which I'm pumping everything into (around 520 a month).  I've also made a fair bit of money from selling some of my possessions. I am a collector of movie props/costumes etc and have made a good amount over this weekend from selling a I can live without or else can easily replace once I'm in a better position.  I estimate I can wipe off my smallest card in about 2 months if all goes well and then my second smallest card within 6 months.....At that point I may be hitting the end of interest rate at some of my cards but hopefully by making such a dent, I will be more attractive for 0% offers.  

[Deleted User]

Pumping money into the smallest debt might seem like a nice idea for the "snow balling" method but it's not cost effective, pay down the biggest interest debt as much as you can, pay the minimum on the lowest interest rates and you will save more money - paying the minimum on the debt with most interest just means you get more debt

abaka

Deleted_User said:

Pumping money into the smallest debt might seem like a nice idea for the "snow balling" method but it's not cost effective, pay down the biggest interest debt as much as you can, pay the minimum on the lowest interest rates and you will save more money - paying the minimum on the debt with most interest just means you get more debt

The only card I do pay interest on is my second lowest balance (and it's my lowest balance APR so not huge amounts) so it will be cleared fairly soon anyway.

I just feel snowballing will work best for me, the quick wins and then being able to pour the money into the next card will do wonders for my own "Mental Outlook" around these debts.

born_again

TadleyBaggie said:

By closing the unused cards, and hence reducing your total credit limit, you would increase your utilisation percentage significantly. This could affect your chances of further credit.

As is leaving them open. Lenders look at available credit V income. Affordability. Utilisation of the debt is not something lenders will look at. It another myth perpetrated by the CRA.