[Closed] Credit Cards

Money saving expert have a free Experian credit check service that gives a break down of your rating according to Experian. It will also recommend areas to be aware of, like having to much unused credit.

I would bin them off as soon as they are cleared.

It sounds like you’ve struggled with CC debt and are trying to change that by paying them off with that loan?
If that’s the case don’t worry about credit rating, do what’s best for you and your own financial well-being. I’m sure “making sure you have a good credit record” is a line cooked up by credit card company’s to suck you in to having a card.
As long as you don’t have any bad debt or fall behind in payments your credit rating will be fine for whatever you need. When I got my last mortgage HSBC were almost bewildered that I didn’t have a credit card at all and were falling over themselves to give me a mortgage!!
I do have one now but only ever at 0% but I’m very strict with them - the temptation to spend on them can be very great at times though.

Your plan seems sound. No harm in keeping what you can manage (although savings are preferable to c/c for emergencies - easier said than done perhaps), but I'd be cancelling any you don't use. I'm not sure they would just cancel themselves, and I believe the number of credit lines you have open can impact your credit score.

We have a virgin credit card for the shop. Back in the days of air travel ,air miles was a good idea. For the last 10 yeasts years we would do about £6000 a month on it and pay it off every month.
Now air miles are pointless we decided to get a John Lewis card. They will only give us a £1000 limit. Not sure how credit scores are worked out but I would have thought we were a safe bet.

Will it effect my credit score more by closing the account or just paying them off and let them cancel them due to inactivity?

Although it varies, most credit checking systems check a couple of things against any CCs you've got, 1. How much of your credit are you using routinely (as a percentage of the limit) 2. Are you making regular payments that make a difference to the overall level of debt. If you close them with no balance, they come off your credit score going forward but your debt history for hard checks against you (mortgages etc) is 6 years, so the history of them (any missed payments etc) will still show until 2026

Fantastic that you've managed to sort out your CC debt, well done.

I'm going to make a possibly unpopular suggestion; to keep one going at least, and to use it appropriately

- larger PLANNED purchases > £100, especially mail order; so you benefit from the consumer protection if the item is faulty / doesn't arrive

- no impulse buying. Don't take it out with you unless it's for a specific purpose.

- pay it off in full every month; if you need to or can't track your outgoing, put the same amount as the purchase out of your current account into a different place as if you've actually paid cash. Then your current account is always up to date against future CC debt.

It will help to maintain your rating in case you need it in future (not all credit is bad) and give you that protection that the Consumer Credit Act provides. Sadly in these times, some companies are going to go bust and as the HoF debacle showed, you can't guarantee that you'll get what you paid for.

https://www.thisismoney.co.uk/money/howmoneyworks/article-3062736/How-credit-cards-work-use-wisely.html

It sounds like I was in a a simiar boat a few years ago - expensive credit card debt and having to budget to the pound to manage it.

What I did once they were paid off was close them off, cut up the cards and remove all temptation to use them.

The £60pm your saving, pretend it doesn't exist. Stick it in a savings account which takes a few days to access (monzo has one like this, there will be others). Allow this to build up as your emergency fund.

Same goes for when the loan is paid off, stick that money into the savings account.

We all "know" how expensive cc interest is, but having the stark contrast between putting the, let's say £300pm to service the debt and how slowly the balance declines to then be putting the same amount to a savings account which rapidly increase in value. It really puts it into perspective.

Whether to keep the cards depends on whether you can control your use of them. If having them means you'll run up more debt, bin them. If you can pay them off in full every month, my understanding is that it helps your credit rating. You're proving you can be trusted to pay off debt. If you have no cards, credit agencies assume you were either refused a card, for which there must have been a reason, or didn't want one because you can't control spending. I think two cards was the optimum for a good rating - more cards meant you needed a lot of debt.

Having no credit cards doesn't make you a better candidate for credit. Companies (AIUI) want to make money from you, so if you use cards a lot and pay them off, you are both low risk and high profitability, so you get good credit. Your credit rating isn't only about risk, it's about how much money they can make off you (according to that bloke on the telly) and risk of default is only one part of that.

Using credit cards is generally held to be a good thing, I think, as long as it gets paid off. For example we use our John Lewis card to do all our food shopping, and clear it in full each month. This way we get JL vouchers in the post every so often. We have another card off which we pay a sizeable but affordable amount each month, and anything we don't want to fund from ready cash can be bought on that (e.g. fixing a car) and it'll be cleared in a few months. We also have a lot more credit available for an emergency - e.g. if my wife has to fly out to her family at short notice or something.

Bottom line is - don't spend anything on CC unless you KNOW for a fact it's only going to be on there a few months.

Regarding the credit rating thing - I checked my score recently and it showed that I have a very good credit rating and would qualify for any credit card or loan however it also shows I have dreadful cashflow because I have £0 (never any more, never any less) in the three bank accounts they have recorded (this isn't correct and I do have money, but how they can work out I have a good credit rating with no money I will never know)!

I know I definitely want to get rid of the Aqua and Vanquis and Barclaycard. All three are high interest (Above 25% Apr) credit builder cards so they are definitely going. All have a credit limit of over £3000 but balances of between £700 and £1699.
Before my Mortgage my credit score on Experian was 192 and very poor, since getting the mortgage it’s jumped to 402 and fair.

The monthly saving are going to be put in my isa for holiday or Christmas next year etc.
I’m not struggling for money but I’m paying out on credit cards each month and the balance is not coming down fast enough. So I’m trying to blast them off but saving money also.

Looking for some advice regarding my Credit cards. Just secured a loan from my bank and plan to pay off my higher interest credit cards (Aqua, Vanquis and Barclaycard) with the loan I’m saving over £60 a month for 3 years and obviously paying all three off.
I don’t plan to use any of them again.
Will it effect my credit score more by closing the account or just paying them off and let them cancel them due to inactivity?

I’m going to keep my low rate Tesco credit card for emergencies which only has a balance of £50 currently that I pay off in full monthly.

Aiming to only have my Mortgage, utilities, council tax,motorbike hp and mobile as outgoings by 2025.

I could write a few thousand words on the subject, but I'll try to keep it short.

I used to be a Corporate Finance Underwriter, as in a wrote complete finance deals for tens of millions of pounds a year for a large bank, I also avoided bankruptcy by the skin of my nuts 10 years ago, I "score" around 997-999 on Experian these days, but I've been as low as the high-100s. So I know the industry and I've been through the ringer with it.

Anyway, preamble over.

"Credit Scores" completely nonsense, there are only 3, Prime, Sub-Prime and UnCredit Worthy. Yes I know the agencies make a lot of fuss about this and that, but that's the truth. Every finance co devises their own "score" by buying raw data from the agencies. Pay you bills on-time and you'll always be Prime, that said, since the banking crisis of 2008 'Affordability' is just as important. Whilst having £1k of Debt against a £10k limit might increase one of these meaningless scores, it also tells an underwriter (or algorithm for consumers) that they have to take into account that the day after they give you a proposed lend, you might just borrow another £9k which affects your credit worthiness.

Credit Cards, a crooked industry (I've got 2, my Wife has 3, I'm not virtue signalling) because Humans think they're rational, level headed beings we consider them by figures, maths if you like, but they're not, they're emotional. "Emergencies" you'd be amazed how more often people have them, when they know there's a safety net. You're far better off considering what could actually go wrong and mitigating for that, rather than having ready credit on the hip. Most people will sleep better with Boiler Cover and an Greenflag membership than a £10k limit on a Braclaycard. I know, you can have "free money" endlessly transferring between 0% deal to 0% deal, never paying it back, or interest, which is obviously why the credit card industry makes billions each year.

Without trying to preach too much, if I was OP, and I was in that position. I'd cancel them all, just reading between the lines, 2 sub-prime cards (Aqua, Vanquis) a Barclaycard they do prime and sub-prime but they're usually at the bottom of the market. That paints a picture of someone who is prone to over-spending. Keeping a 4th Credit Card because it's "low rate" (but still probably 4-5 times higher than a decent personal loan).

Personally, I'd pay off and cancel all of them, if you can't live without at least one, do what I do, keep it in a locked 'safe' (mine is more of a petty cash tin).

That's not to say they CAN be a useful tool to increase consumer protection AND offer people with the right kind of physiological makeup very keep borrowing, but they're there to entice you to spend more money, and for the majority of people that means paying large amounts of interest, that's why they make billions of pounds every year.

Having been down the credit card trap myself when I was younger I would strongly recommend the following:

A: Close your Aqua, Vanquis and Barclaycard accounts as soon as they are paid off using the loan. This will remove any incentive to transfer a balance to them at 0% that you accrue on your Tesco C/C.
B: Keep the Tesco C/C as your only one. Use it only for online purchases where you have the equivalent amount in savings or your current account. As soon as you spend money on the Tesco card pay it off the day the transaction shows up on the online statement.
C: Keep the credit limit on the Tesco C/C low enough to not to be tempting to use for something like a new bike (sub £1000 is a good start) but enough to cover an unexpected bill eg the car needs work.
D: Keep any use of the Tesco C/C to below 1/3 of the credit limit as this shows you have control of your spending and improves your credit score.
E: If the Tesco C/C has a balance on it going into the next month and thus attracts interest do not use it until it has come back down to 0.
F: If you find you cannot keep the Tesco C/C at a 0 balance pay it off and cancel it.

But most importantly point G: Get into the habit of saving every month. That £60 you're saving with the loan? Put it into the savings account every payday, or even better set up a standing order for it to happen without you doing anything. You can always take the money back out of savings if you need to or want to buy something but just having to take the action of transferring the money across really helps to cut out a lot of discretionary and impulse purchases that quickly empty bank accounts.

Good luck and if you need any advice from someone who went massively down the credit rabbit hole and dug their way back out the hard way PM me.

Unless you're planning on taking out any significant loans in the future, I don't think that credit score really makes any odds.

Pretty much every penny I spend that isn't a DD or SO goes through my John Lewis card, even more so now that Google Pay lets me just wave my phone at the reader. It's paid off in full every month, so it is really just a payment method rather than a borrowing facility. It costs me nothing, gives me vouchers. Why would you not do this?

Pretty much every penny I spend that isn’t a DD or SO goes through my John Lewis card

We do the same with our Tesco card and have just spent £175 of Clubcard vouchers on two massive shops (they still have a 95 item limit) and giving the whole lot to our local foodbank.

offer people with the right kind of physiological makeup very keep borrowing

I have the wrong kind of psychological makeup, and consequently I have been so deeply scarred over the last 20 years that I now the end is in sight I have a STRONG aversion to CC debt.

You'll tell yourself it'll be ok but it won't. Use it as a short term buffer or not at all.

Good man!

Fantastic that you’ve managed to sort out your CC debt, well done.

I think we need to be careful on this one. The OP has made the first step towards sorting it out, but he definitely has not actually sorted it out yet. He's just transferred the debt elsewhere. That elsewhere is cheaper, which is excellent, and will help him pay it off, but it is not sorted.
If we use language like " sorted it out" them that encourages the thinking...... Ooh, well I've sorted out my CC debt and got nothing outstanding.... so now I can buy....

Basically its been said.
Close all but 1 (the Tesco sounds best) use that appropriately as required, but don't build up debt.

Contrary to the above advice (score is meaningless no-one uses scores for lending decisions) that isn't quite my experience (having worked for the main 2 UK CRAs supplying lenders).
Many 'proper' lenders will build their own scores and decisions from the data, but you would be surprised the number of big names that do use the CRA scores, maybe not exclusively but often as a significant component.
They might not be the consumer score you see, but the score you see should be a reasonable indicator.

But dont get too hung up on your credit score, if your meeting your bills (inc new loan) have access to credit and use it appropriately (credit card) then your 'score' will improve steadily over time, especially if you are also building some savings.

Its a great feeling getting in control again when you've been spending hundreds a month servicing debt being debt free, good luck

Pretty much every penny I spend that isn’t a DD or SO goes through my John Lewis card, even more so now that Google Pay lets me just wave my phone at the reader. It’s paid off in full every month, so it is really just a payment method rather than a borrowing facility. It costs me nothing, gives me vouchers. Why would you not do this?

Because the majority of consumers won't be able to keep to the "pay it off every month" part. Will continue to spend more than their income each month and will eventually owe a few thousand pounds (ave UK credit card debt is around £3k) at rates of between 20%-40% apr, meaning a good few hundreds of pounds a year in interest.

That's how John Lewis can afford to give you a free payments facility plus vouchers, whilst making millions in profits on their credit cards alone.

This is the problem with Credit Cards, by allowing some borrowers to effectively 'game' the system to get free borrowing with extra consumer protection and other incentives, it creates the impression that they're 'smart borrowing' when in fact for most borrowers it's the most expensive way to borrow.

And it's not just about having discipline or 'common sense', that's no more helpful than telling over-weight people to just "move more, eat less" if it was that easy we wouldn't have an obesity problem in the UK and we wouldn't collectively have £70bn in credit card debt.

It's a subject I disagree with that Martin Lewis of MSE about with (not that he knows). He was one of the original flag bearers for 0% switching deals and Stoozing, he does go to some lengths to say things like "if it's right for you" but seems unable or unwilling to accept human nature, especially in younger adults means they're far more likely to end up with greater debt than reducing the cost of the debts they have.

I'm really pleased to say that I have about £100 in credit card debt. I spent the last 8 years of my life clearing over £10k in cc's and over £20k in a personal loan. It was a hell of a life lesson. My advice, if you can get them cleared, get them cancelled and cut the cards up!

ave UK credit card debt is around £3k

I use mine as described - paying off in full each month, never not done so.
I spend about 1k a month (thats all of my expenses bar housing, including reimbursed work expenses), I have to pay it 4 weeks after the statement from the previous month, so between 4 and 8 weeks (so average 6 weeks) after I've spent it.

This means that I'm on average 1.5k "in debt" despite paying as soon as I'm asked, for no financial penalty; is that counted in that 3k figure?

This means that I’m on average 1.5k “in debt” despite paying as soon as I’m asked, for no financial penalty; is that counted in that 3k figure?

No.

If you pay the bill in-full and on-time it's not reported as 'debt'.

It does however highlight a potential issue (admittedly one that's not been a problem in 50+ years of credit cards).

Those of us who pay our credit card bills in full each month, you could argue are living today on next months wages. Some aren't and have the equivalent of the balance in their current account the whole time, but I wouldn't like to guess what % that is. Should their income suddenly pause, or end would they still be able to pay that bill?

This is exactly how Amex worked, they have lots of credit cards now, but originally they were a charge card provider and you had to pay your balance in full each month.

If you pay the bill in-full and on-time it’s not reported as ‘debt’.

I disagree - when we were sorting our mortgage out a few years ago we had around £2,500 on our credit card (which would have been paid in full when we got our monthly statement) and it was flagged - it took a bit of sorting by our mortgage advisor to disregard it as debt even though it wasn't even due.

Money saving expert have a free Experian credit check service that gives a break down of your rating according to Experian. It will also recommend areas to be aware of, like having to much unused credit.

Does this really count against you?

I rarely use more than 15% of my CC limit as they kept upping the limit and its now the best part of £10k...

I think we need to be careful on this one. The OP has made the first step towards sorting it out, but he definitely has not actually sorted it out yet. He’s just transferred the debt elsewhere. That elsewhere is cheaper, which is excellent, and will help him pay it off, but it is not sorted.
If we use language like ” sorted it out” them that encourages the thinking…… Ooh, well I’ve sorted out my CC debt and got nothing outstanding…. so now I can buy….

That's the exact trap I fell into after the first time I used a loan to pay off a credit card when I was 19. Was only a £500 loan over 12 months but within 3 months I had found myself back in the bank asking for another £500 to be added on top of the original loan. This went on for a few more times before I was owing over £5k. Back then there were few real checks - self-certified mortgages were the rage - so you just went to another bank and repeated the process.

Does this really count against you?

I rarely use more than 15% of my CC limit as they kept upping the limit and its now the best part of £10k…

Yes. Say your credit card balance is down at £250 but you want to buy a car on finance. The checks assess you as good for £25k of debt over 5 years and the car you are buying is £20k. Should be no problem then surely? But what is to stop you getting that £20k car on finance and the very next day using your credit card to pay for a £9k kitchen? Then you have gone from £500 debt to £29.5k debt overnight when you can only realistically afford £25k. So when they look at your ability to afford the car they take into account that you already have access to £9.5k of credit and adjust how much they are prepared to lend you accordingly, most likely refusing to lend to you against the car.

You may well be a very sensible person who will not do that but there are thousands of people who will buy the new car on finance then buy a holiday or a kitchen on the credit card without thinking things through. If you're using a maximum of £1.5k of your credit card ask them to set the limit at around £3k, you then still have a buffer if you need it for an emergency like a boiler breakdown but are also limiting your potential liabilities.

And it’s not just about having discipline or ‘common sense’,

So what is it about?

Optimism?