Which credit card to close?

[MummytoCSJH]

Hi - I built up a fair amount of credit card debt over the past few years when I was unable to work due to a major surgery. My income has now increased, by a decent amount, and I received a small lump sum, just enough that I've been able to pay it off with my final payment bringing my debt down to £0 on Monday (Woo!). My credit score is about average but I'm trying to plan for a house and car, which will have to be on finance, so I do want to improve my score and how I appear to lenders, so I think I want to keep 1 card open for my food shopping and use a direct debit to pay it in full every month, and also in case of emergencies like insurance excess or something. My purchases building the debt were nothing frivolous, just my actual bills as I wasn't entitled to any benefits, so I'm not worried about avoiding spending/my willpower if I have a large balance etc. I'm wondering which one I should close though. These are the cards I have:

Card A - limit £2k - 54.90% apr - opened 2016
Card B - limit £750 - 30.24% apr - opened 2019

I did have another card which I opened Feb this year with a balance of £600 as a balance transfer at 0% which was paid off last month before the 0% ran out (would've been extortionate otherwise) and I closed that one as soon as it was paid.

Now, I've read it's best to keep the one you've had the longest open, and not close/open loads of accounts. Also don't want to have too much available credit that they wonder why I need more, or none so they can't see how I manage it. Never missed a payment on either card, never gone over limit, of course card A has a ridiculously high interest rate but a higher balance limit, but card B still has more than enough for me to make the monthly payment of my food bill on! As I know I will be paying in full every month the interest rate perhaps doesn't matter as much as it usually would? Both cards I have found have great customer service, a big thing for me is that Card A can take instant payments which update straight away and Card B takes a few days for a payment to process.

Any thoughts? Thank you in advance!

why do you want to close a card?

I don't need both, and it will look like I have lots of credit which I then don't use on my credit file.

With limits that low I would keep both open, as both are "starter"/"sub-prime" sorts of amounts and therefore only having one could give the appearance that's all you're eligible for. Car finance when secured against the vehicle is actually usually easier for people to obtain than say an unsecured loan so you may be overthinking there.
Closing accounts so quickly could actually work against you as you may appear like you don't trust yourself. I would sign up to creditkarma as it's free and will give helpful pointers on how best to manage your presentation of your file. Your "score" isn't really taken into consideration with lenders but more the history and management of your affairs.

Go and ask on money saving expert- there is a section

I thought they looked at available credit- so good to have some not being used?

When I closed a few of mine last year my Experian score (I know that it is meaningless) went down.

Well done for getting out of CC debt!! I would keep them BOTH open, you can spend everyday expenses and increase your credit score.

Keep to around 25% of the limit and pay in full every month. You will show you have spending and repaying power!!

Good luck with car and house

My score went down when I closed a credit card

They prefer to see available credit and low utilisation. So if you're using 10% and paying it off that's a good sign.

Thank you @54321GoGoGo :) I'm so happy it's finally going to be gone!

I have clearscore and experian credit tracking and recently did sign up to creditkarma but I must've answered a security question wrong (think they asked me about a loan and I said I don't have one but it might be due to O2's new way of billing a loan for the phone and contract for the data) so it said log back in to try again in 30 days, but I'll definitely do that when I can! I did have a higher limit on the 2k one but brought it down as I was paying it off, maybe I shouldn't have done that. That's good news about car finance - never applied or anything but from next month some of the money I was putting towards my debt will be going into savings for the deposit and I'll only be getting something cheap secondhand so I'm hoping I can get a good deal when I've bumped up my file a bit.

I definitely wanted to close the balance transfer one as it would just have been ridiculous interest and a 3rd card in my purse for no reason, but I think I might keep both of these two and just use the lower interest one for the monthly payments, especially if it will look bad closing them in short periods.

Thank you so much for all the advice. I had no idea what I was doing when I took them out but really didn't have any other options for the amount I needed, I couldn't even look after myself for over a year after my surgery but didn't want to lose my rental or get into trouble. I'm just going to be so careful and keep the direct debit for 100% of any purchases from now on.

I agree about keeping them both open. Having two cards with relatively small limits won't negatively affect your credit score and it could even be better to have 2 than 1 as having credit available but managing it well by using only a small percentage of the available limits is a good place to be in - I think this shows the banks you can manage your credit well, you don't see it as free money that's there to be spent.

I'd use Card A for food shopping and keep on with your plan of using it for food shopping and paying off in full every month and keep card B as your emergency card as it could be that you can't pay off the excess by the statement date and it gives you a bit of breathing room - if you pay off the food shopping and keep the excess on the card while you sort things out, you'll have to pay interest on the whole balance and at a higher rate.

Maybe also ask your second card if they can lower the interest rate now that you've improved your credit score so it will cost you less if you do need to use the card.

I would set up "pay off full balance" direct debits on both cards, and for the next couple of months spend less than £100 on each followed by paying off immediately with the direct debits. Then in March apply for a new credit card from the posher end of the market where APRs are more like 20% - again setting up a full balance DD and keeping monthly expenditure low. You won't need a high credit limit as you won't be planning to have much debt on there but APRs of 30-50% are very high and you should be aiming to close both of then as soon as you have a reasonable alternative in place.

Thank you both - great ideas and definitely will be looking into getting a lower interest card in a few months.

I'm back everyone - as advised I set up full balance direct debits for those 2 cards, I've now applied and been approved for a British airways Amex with a limit of 7200 at 22.2% apr. Chose that one purposely to build up flight points, as I usually collect them through shopping etc anyway, and if I spend a certain amount in the first 3 months I will get 10k extra points, the amount to spend is less than my normal expenses anyway that I already spend and pay off every month so that's really good. I had no idea they would give me a limit like that until they approved it already! I also selected for them NOT to apply credit limit increases automatically so so can keep an eye on it that way. Would you still recommend leaving them all open? There is currently no balance on my other cards (well this months spending but only what will be paid off in full!), I won't even go near half of the new balance so could easily close both of the other 2 and just have this one. Is that the best thing to do? Thanks so much again everyone :)

I would keep them open, if any get compromised then you still have others to use, I have 4, they are 2 which I use for general spending and get points on so get vouchers for using them, 1 which I use for Amazon and eBay(PayPal) and 1 that I don't get any rewards for but it doesn't have charges if I use abroad (I haven't used that one for a while). I pay them all off in full each month and my credit score is very good.

Close one of them now. Doesn’t matter which really - whichever you feel psychologically less attracted to.

I usually keep a couple of ‘dormant’ cards I’m not spending on around because you can often get offered attractive transfer rates or whatever, and also because sometimes it can be useful to have a separate card to your regular spending card if you have a big one-off expense e.g. you mentioned insurance excess. We have a card used for everyday spending because it pays cash back and pay off in full every month but if there is a big expense that would take me a couple of months to budget to pay off I prefer to keep that separated. So if you thought that would be the case the one with the lowest interest would be preferable, I guess. Neither are the greatest rates though so whichever suits you best to keep/close.

Thank you both :)