Should I get rid of the cards that I've cleared when I know I'll need the credit??

cc_rider

(Sorry about the reaaalllly long post, my situation seems a bit complicated to me, although its better than it has been for years. My 2 actual questions are at the bottom.)

I am a bit stuck as to what to do at the moment. I have been managing my debt for several years now (sometimes marginally) and I'll be at a crossroads in July. All of my debt is now on credit cards, having cleared my (more expensive) overdrafts.

Last year when Egg, Capital One and Mint (as well as Morgan Stanley) raised my interest rates from about 16.9% to an extortionate 21-23% I had a chat with my parents and took adavantage of a 12mth 0% offer on their Barclaycard for about £10k (Saving myself about £2k in interest.)

Having cleared all of those cards I now have about 12k of available CC credit (plus £3k on the MS and a little on my Barclaycard.) As well this as an overdraft facility on my Alliance and Leicester Account which can make available £1900 @ £5/mth (~3.3% AER) and a barclays additions overdraft facility of £1900 that would cost £6.50 fee plus 9.9%AER

***The obvious thing to do is cancell the cards I've cleared, then reapply to get the best deals, but I'm worried that if I do this I won't be able to get enough credit to take back the balance (~£7.75k) from my parents at the end of the 0% period in July 08. I've heard that the banks are tightening up, and I although at worst case I can continue to service the balance at the standard rate, I don't want to leave my parents saddled with anything that could affect their ability to remortgage when my dad hits retirement age next year.***

My monthly cash flow works out that I spend what I earn as salary (pretty much to the penny, including minimum payments to CC's.) I work in sales so chunky commissions mean that I can make some dents in the debts as and when. I actually cleared both of the £1900 overdrafts over the past two months and I'll take home an extra £1400 this month, but that will be it for at least 2 more months.

I am pretty disclpined lately so keeping the cards and having access to £16k worth of credit is not really a risk for me (not gonna go on a spree!)

Getting 0% transfers every 6-12 mths is a bit complicated, particularly as the limits they tend to give (~£2.5k in my experience) are not big enough to simplify things. I've tended towards life of balance offers but these seem to be less frequent.

Situation:

debt

£2.9k barclaycard at 6.9% life of balance (don't know if I can get a decent offer if I clear this, plus they are gradually reducing my limit as I pay it off)
£1.4k morgan stanley at 5.9% life of balance (if I clear this I can get 0% for 5 months)

£8.65k parents barclaycard at 0% till jul = £7.75k to trx back

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£12.9k debt

available credit

£1.9k Alliance & Leicester OD facility @ £5/mth = 3.3%Aer
£1.9k Barclays Additions OD at £6.50/mth + 9.9%AER
£3k Morg stanley surplus credit limit (can't use without screwing up 5.9% LOB)
£0.5k Barclaycard surplus credit limit (can't use without screwing up 6.9% LOB)
£4.5k cap one
£2.5k egg visa
£2.5k egg money
£2.6k Mint

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£19.4k Credit card/OD capacity that I could use.

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questions

1. should I cancel my cards and reapply (to try and get best deals) or hold onto the cards and hope I can get a good deal (to ensure availability of credit) in july.

2. when have surplus cash like the £1400 this month, what do I do? Pay of low % LOB cards that I'm paying interest on now, or set aside money in a savings account to pay the high interest stuff when it comes back from 0%?

CannyJock

Lot of info to absorb so I'll apologise up front if I miss something.

First impression is that you have £ 13K of debt and £ 19K of available credit. Some of that is on horrendous interest rate, and isn't currently used.

First thing I'd try and do is to take the "worst" 6K of that where you have cleared the cards and call them to negotiate a better deal. If they don't play ball then ditch them - if they do play ball then happy days and you might be able to start working on them. Do this at a time when you actually want to transfer balances (like when existing 0% offers are due to end) and leave the cards "unused" until then.

Great article that Clariman wrote on : http://www.makesenseofmoney.co.uk/a_extend.html

Basically phone them, you're looking for 0% for infinity with 0% fees (and cashback if they do it). Let them talk you down from there

If they won't play ball, dump the cards and it deals with your surplus of "available credit" in the most efficient way.

Egg Money card - keep it for stoozing potential for sure - but do you need a £ 2.5K limit. Rather than ditch this one, reduce credit limit to £ 500 I'd say.

Hopefully that deals with the 1st question - if you can't get offers then cancelling the debt may well put you in a better position nearer July to get new deals.

On the 2nd question, I'd say put it in the Barclay ISA so that it can earn 6.5% tax free for the months between now and then. You can take money out of an ISA easily enough (min £10 on that one), but you are limited to being able to deposit a maximum of £ 3600 in the new financial year (withdraw as often as you like but total deposit over year <= £ 3,600).

When your first 0% deal ends, put the £ 1400 + interest against it. Also worth looking around for new 0% deals if you've left a few months between applications so no credit searches and no missed payments.

cc_rider

First of all, many thanks for your reply. Its given me a lot to think about, and more idea of what's possible, too.

If I understand you correctly, I should keep the cards until the end of the 0% period, then try to negotiate, because I'll probably get a better deal doing that, and the worst case is I can still transfer the balance back from my parents (important to me even if it costs money,) even if I can't get a deal.

In the meantime, I'll stick the £1500 extra this month in a Barclays Cash haven ISA (instant access) at 6.5% AER. Hopefully before the end of the 07/08 tax year, and any other commission payments up to the limit for 08/09. Then use this cash plus interest to pay off my most expensive cards once their 0% periods run out (hopefully a year or more from now.) Obviously this strategy is marginal vs. simply paying off the £3k on my barclaycard, but at least that one is more or less on a loan rate. I also have about £500 that I have budgeted for holidays/presents and probably won't use for a while.

Do you think its advisable to put in £1500 of my A&L overdraft to the ISA? (£5/mth OD fee = 3.99% AER, which would give me a margin of 2.5%; ...also, I'm fairly likely to go slightly overdrawn anyway so I'll probably end up paying the fiver regardless.)

Finally, I should reduce my Egg Money limit to £500 (keep for stoozing, whatever that is - will look up later) presumably to improve my credit score. Should I also ask Morgan stanley to reduce my limit to close to my balance, as the ~ £3k headroom I have isn't much use without ruining my LOB deal?

Again, thanks very much for your help.