Credit Cards, would you balance transfer and shut account?

[Nic jones]

Here's the scenario:

Credit Card 1, £1500 limit, Current balance £420 28.9% APR 2.9% transfer fee.

Credit Card 2, £500 limit, Current balance £440 16.9% APR

Thanks to a lack of financial nous and spending too much money on beer, women and cars I find myself with these two credit cards with the above balances and a shagged credit score.

Currently I'm paying both cards off to the tune of £20 per month (not much but it's chipping away at them slowly!), and then paying lumps off card 1 when I have some extra cash available.

What I'm thinking of doing is transferring the balance of Card 2 to Card 1 and closing it down, I know the interest rate is worse, but the method in my madness is that I only have one card to make a monthly payment/one off payments on, and it should help my credit rating slightly by reducing the amount of credit I have available to me and the number of cards I have.

Tell me, am I being daft or is this a (semi) sensible thing to do?


Please be gentle with me, it's me birthday and about bloody time I made some sound financial decisions!!

Cheers

[btsidi]

No. I would increase the limit on the cheaper card way before your route of consolidating at a stupid high rate.
Consolidating doesn't solve the underlying problem it postpones it.
Better still look at your incoming and outgoings and look to increase the £20 payments immediately. Even staying in an extra night a week could double the amount available to pay off the debt!

[bigandclever]

Back of fag packet maths, assumes no lump sum payments and £20 a month on each card...

Card 1 takes 29 months to pay off and Card 2 takes 26 months to pay off.

OR

Balance transfer £453 (balance of £440 + fee) from Card 2 to Card 1 and pay £40 a month into Card 1

Card 1 takes 31 months to pay off.

Does that sound better than your current situation?

Another consideration is that lenders sometimes want to see bigger, more complicated credit lines when assessing your 'worth' to them, so you may not be improving your score (which is only determined by the lender at a particular moment and is utterly fluid in how it is calculated) by deliberately reducing your credit lines.

If I were you I'd do some digging around for any lower rate cards that may be available to you and working out how much it would cost to balance transfer.

[Nic jones]

Righty ho, thanks for that, I've got a phone contract expiring next week which will save another £30 per month so will leave the cards as they are and just up the payment on Card 1 first to pay it off quicker and then once that is finished I'll do the same to card 2.

ETA, I don't think they'll let me have another card, and certainly not a low interest one, I've not got the best of financial history's, but have decided I want to be debt free (excl student loan) by my next birthday 365 days from now!

Cheers

Edited by Nic jones on Wednesday 16th September 10:45

[Nic jones]

IL_JDM said:

If one of your cards are MBNA, you can get a 9 month balance transfer rate of 1.9% with a 3% transfer fee.

Te £20 you're paying a month is interest, so you're not actually paying anything off..

Nah, card 1 is HSBC Mastercard, card 2 is Egg Visa.

On your second point, the interest on card 1 is around £8-9 I think per month, so net I'm paying about £11 or £12 off. How depressing!

Edited by Nic jones on Wednesday 16th September 10:52

[Podie]

Is your credit score so screwed you can't get a Virgin money card on 0%..?

See www.moneysavingexpert.com for details.

[bigandclever]

IL_JDM said:

Te £20 you're paying a month is interest, so you're not actually paying anything off..

More accurately, a large proportion of the £20 is interest, so he is paying off the underlying balance albeit much more slowly than if there were no interest (like taking 30ish months to pay the whole balance off instead of the 21ish it would be interest free).

[bigandclever]

IL_JDM said:

Yep, though be careful, some companies are allowing you to repay the minimum which is LESS than the interest they're adding!

I would advise applying for the Virgin credit card (part of the MBNA group).

Funnily enough, Virgin are one of the current bunch doing that trick

[btsidi]

Nic jones said:

Righty ho, thanks for that, I've got a phone contract expiring next week which will save another £30 per month so will leave the cards as they are and just up the payment on Card 1 first to pay it off quicker and then once that is finished I'll do the same to card 2.

Pay the £50 off the more expensive card, and the £20 off the cheaper one.

[Nic jones]

Slight update, turns out I'm eligible for a Natwest Platinum jobby with 15 months 0% balance transfer so have just transferred the whole balance from the Mastercard (28.9%) and will take great delight in chopping up the card! Result!

[LMC]

Nic jones said:

Slight update, turns out I'm eligible for a Natwest Platinum jobby with 15 months 0% balance transfer so have just transferred the whole balance from the Mastercard (28.9%) and will take great delight in chopping up the card! Result!

Nice one !

Its weird though that you said you have an EGG card but think that your credit rating is not so good.

Over the past 5 years I've had a loan from RBS, A+L, credit cards from Virgin and MBNA (both MBNA really), one from Lloyds, one from Mint, to go with my long term Barclaycard and BOS card. Not to mention a mortgage from RBS.

That's a lot of different companies chucking their cash my way. Getting to my point, at last, EGG are the only mob who have ever refused me

And by the way, every one of the above is now clear, with the exception of the mortgage