Should I cancel my old credit card?

mazzoto

Hi, I am on disability (low income). New here, bear with me. 

On my RBS credit app it says that having a credit card limit of above £4K would help improve my credit. My credit is currently in the 'Excellent" category for all three bureaus. I just wanted to pop it up a bit as the advice was to get a higher credit limit over 4K. (tho it will have taken a hint as I have recently applied for a credit card, as explained below:) 

When I use credit cards, I usually make a small purchase (say groceries) and then pay them off immediately. As in, I go to the grocery store, I pay £33.20 on my credit card, go home and immediately transfer £33.20 from my main account to my credit card to pay it off. I don't know if this is the correct way to use the cards, but I'm scared of going over, and I have a bad memory so it's just easier for me to pay it immediately. 

I never carry a balance over, and don't really have any big purchases to make. I NEVER use my card if I don't already have the money in my primary account to pay it immediately. 

I had a credit card A through RBS since probably 2023 or 2024 that was originally 0% but it went up to 23.9%. That limit is £2650, but at most I've probably only used it for £200 and paid it off immediately. 

I have upgraded to a Reward banking account through RBS, so there is a deal if you also get the Reward credit card (let's say credit card without having a charge to use the card. I honestly just wanted it for the rewards back for groceries and boost my credit numbers a bit as the RBS app suggested.

I applied for this Reward credit card thinking it might give me a limit of like £1000 at best. It's given me a limit of £6700. 😳 I have no intention of using anywhere close to this because it's at 25.9% and, again, I never use a credit card if I don't have the money in the bank to pay it immediately.

I am naive with credit cards, and the way they work I find confusing. Do I cancel the old credit card A and just keep credit card B? 

Or, do I request a lower limit for credit card B and keep them both? 

Or, do I keep the higher limit on credit card B and keep them both? 

I would welcome advice on the best way to manage these effectively. I honestly find all of this quite confusing, and I don't want to worsen my credit score by having too high of a credit limit available, or risk fraud etc with these. I don't know if there is a benefit to having them both open, if there is a benefit to having higher credit limits, etc. And I wasn't sure where else to ask. 

Thank you for your patience and advice. If you have any questions I am happy to try to answer them. 

mazzoto

Note for clarification: Apologies, somehow an emoticon has been put in place? No idea how that happened. 

I wrote credit card A for the old one with £2650 limit at 23.9%  

credit card B for the new one at £6700 at 25.9%. 

marcia_

 If I was thinking of closing a card I would keep the one with the higher credit limit. I know you don't plan on using it but in case of emergency. I did that and am glad because my boiler has packed in and the only way to pay for it is with a credit card because my savings are small. 

ProcessMatters

You’re not doing anything “wrong” here. Having a higher credit limit doesn’t harm your credit score by itself — what matters is how much of it you use. Paying in full every month is the key, not carrying a balance.

You don’t need to pay it off instantly after each purchase either — letting a small balance appear on the statement and then clearing it by the due date is absolutely fine and won’t cost interest.

If it were me, I’d keep both cards open, use one lightly, and pay in full each month. Only reduce the limit if the higher figure makes you uncomfortable — it’s about peace of mind, not scoring points.

mazzoto

https://forums.moneysavingexpert.com/discussion/comment/81855745#Comment_81855745

Thank you, I will try to do that. I was just worried because they've given me a combined credit limit that's almost half how much I have for income, so I didn't know if that would reflect badly, even if I keep quite low for the usage.

Appreciate the reply!

Jami74

Why is your credit score important to you? If you say why you want a good credit a score people can better advise on how to achieve that. Mostly it doesn't really mean much, but if it's important to you then it's important.

If the reason you want RBS credit card is to earn extra rewards, you don't need to keep 2 RBS credit cards for that to happen. Given you find credit cards confusing, are afraid of 'going over' and don't use them unless you already have the money to pay them immediately, there isn't really any benefit of having two credit cards hanging around. The risk is that you spend on the wrong one or pay money on to the wrong one and get into a muddle that way.

The way most people use credit cards is by spending on them and not paying them off until the bank asks for it (sends a statement), this way they can either buy things even though they don't actually have the money yet or if they do have the money they can keep it in their bank or savings account for longer. The credit cards tell the credit card 'bureaus' how much you owe them each month on the statement and whether you pay it all off or whether you carry a debt. If you pay the statement off every month this shows you are responsible and can be trusted to borrow and pay back money. If the statement amount is always zero because you pay it off immediately then it looks like you haven't used it. Most people want to show that they can be trusted to borrow and pay back money so they can get bigger credit card limits or a mortgage or loans etc.

If your only reason for having a credit card is to benefit from the rewards and you would rather pay it off immediately then close the one you don't want, ignore your credit score and carry on doing what works for you.

mazzoto

https://forums.moneysavingexpert.com/discussion/comment/81857651#Comment_81857651

I'm not afraid of going over, I'm afraid of it looking bad on my credit that I have two cards that add up to almost half my income. I do not understand really how credit cards work— when i was a kid, you got credit cards because you were bad with money. I hate having to use them and I hate that keeping good credit requires it. I don't understand how to use them effectively to keep a good credit score.

I'm confused on the timing and when to pay the cards. I always pay them in full but I'm confused about when is most effective to pay them, maybe you would be so kind as to explain your second to last paragraph on paying cards back? How do I know when the right timing to pay them back is? thank you for the advice.

Jami74

For it to show on your credit files you need to spend on your card and wait until you get a statement. The statement will show that between x date and y date you spent £z. It will also show when you need to pay them in order to avoid accruing interest. For safety ( so you don't accidentally miss paying it) you can set up a direct debit to pay it off in full (everything that shows on the statement). When the bank reports to the credit reference agencies they will report how much you owed on the credit card statement and then that you paid it all off. This makes you look like a responsible borrower and means that lenders are more likely to trust you with their credit cards/loans/mortgages. If you sometimes miss payments or don't pay it in full then lenders might not want to give you their credit cards/loans/mortgages.

What I was trying to ask is:

Why do you want a good credit score? For what purpose?

Theres no wrong answer. I am just curious because some people pay high value to the score number and some people don't care what it is. The actual number itself doesn't really mean much, it's just a number that the credit reference agencies have made up to encourage you to engage with them by taking out credit products (credit cards, loans) via their website/app. The banks can't see that number. RBS won't know what that number is or whether the credit reference agencies think your credit score is poor or excellent. When you apply for a credit product they calculate their own score to decide if they want to lend to you. They might look at the credit reference agencies to see if you have a history of paying back money you have borrowed from credit cards or loans. That's why some people who have no credit cards or loans might have an excellent score but find it difficult to get a credit because they have have not demonstrated that they're good at paying it back.

Most people focus on improving their credit history or want a good score because they are planning to apply for some big credit like a mortgage and want to look like the sort of responsible people that a bank would want to lend £000,000s to. You haven't said why you want to improve your credit score/history. As you hate using credit cards, maybe you don't need to.

borack253

Keep both cards open if you can. Use one for small purchases and pay in full each month. The high combined limit won’t hurt your credit if you manage it responsibly. Paying after the statement posts shows lenders you can borrow and repay, which helps your credit history. Only lower limits or close cards if it makes you feel safer.

Windofchange

I've spent today doing a large audit of my financial affairs. Due to taking up various 0% deals over the past decade to move debt around, I've ended up with 5 credit cards. I don't use any for day to day spending, but have (or at least had) a reasonably large debt on the one of them. I have closed 3 of the 5 cards today as I don't need them, haven't used them in years and they are a potential source of fraud. I now have my main one which has a large credit limit on it and then a second which has a similar large credit limit. Feeling much more organised now. To your question, I think you are doing fine and I think the answer to your question will be personal to you - i.e. for me I have been able to pay off a lot of debt recently due to some unexpected money so I psychologically want rid of them all alongside as per above for fraud reasons. Definitely keep one and use it as you currently are, and for the second do you want it?

Zuzi

https://forums.moneysavingexpert.com/discussion/comment/81859372#Comment_81859372

Regarding paying off the balance, just set up a direct debit to pay off the full balance every month whenever it is due. That way you will not have to pay any interest, and it will all be happening automatically so you won't have the hassle of transferring any money. Call the credit card company up and let them talk you through it if you are unsure. It is important that the direct debit will be for full balance, not just the minimum payment, otherwise interest might be due.

This is how I have my credit card set up, and I've not had to pay a penny in interest, and all I need to be aware of is how much I spend on the card to make sure the money is available on my current account to cover the direct debit. (But I do tend to spend a lot more on mine, compared to you, based on your post)