You regret opening your credit card - now what?

By Marianne Curphey

unused-credit-use-or-lose

You've heard of buyer's remorse, but how about credit card regret?

According to a survey by lottery company Lottoland, when it comes to financial decisions that Britons regret, taking out a credit card tops the list.

A total of 67% of people questioned said they felt the most remorse about taking out a credit card, mainly because they had spent too much or under-estimated monthly repayments. They also regretted buying a car on finance, taking out a mortgage and lending money to family members and friends.

Should you close the card?
If you open a credit card and then regret doing so, either because you see a better deal elsewhere or because you're worried you'll be too tempted to spend, it's not a problem to close it, says James Jones, head of consumer affairs at the credit scoring agency Experian.

"If you open and then close a card, you would pick up points on your credit score as you would have successfully managed and concluded a credit agreement," he says.

It's only an issue if you start opening and closing cards with regularity, he adds.

"That's because one of the things that affects your credit score is the maturity of your credit history, and lenders look at how long you have used that particular line of credit when assessing your creditworthiness," Jones says.

In other words, if you keep opening and closing accounts, your credit agreements will show up as relatively young, and you won't have built up a track record of paying regularly over a long period, which lenders like to see.

Jones says that shouldn't stop you switching and getting a better deal, but if you keep closing accounts all the time, it's like pressing the reset button each time.

Also, he says, "every time you apply for credit, the lender carries out a credit check and it shows up on your score that you have applied for credit - it does not show whether that application was successful or not. Those applications are fed into your score."

If you have made a lot of applications for new credit, you may start to appear credit hungry and perhaps a bit desperate.

"Try to space out your applications and plan to close your cards on a one-off basis rather than all together," he says.

"Having fewer cards takes away the temptation to spend more than you can afford," says independent money expert Jasmine Birtles, founder of the website Money Magpie. "So, if you are going to cancel, pick the card with the highest interest rate, rather than the newest."

Getting rid of the cards you don't use - and getting new ones instead - can be an advantage as the best credit card deals are usually offered only to new customers.

Don't be shy about using credit
Not all credit cards are bad news, says Birtles. Having a credit card and using it wisely can work in your favour.

"Credit cards can be a really useful money management tool," she says. "They can help you buy larger items and manage your cash flow, spread the cost of holidays, and save you from having to carry lots of cash when you are travelling."

By being sensible with your credit card, you could improve your credit score and your chances of getting a good deal on a mortgage, broadband or mobile phone contract.

"I personally have a card that I use purely for travelling, and one that is for tea and cake when I am travelling around on business or having meetings in cafes," she says. "That way, I know how much I am spending on subsistence each month, and I can cut down if necessary. With a dedicated card, you can use it as a way to track your spending, or as a business tool to manage your expenses."

However, she says, not all cards are equal.

"Some cards offer much better deals than others," she says, "and if you choose the wrong one for your lifestyle or needs, then you can quickly build up debt."

Only you can get yourself into debt
Having debt that is a burden is one of the main worries for Britons, and many blame others for their debt, according to research by Voucher Codes Pro.

Its survey found that one in three Britons in debt blame banks and lenders for their financial distress, whether because they make it too easy to get money fast, they continually increase allowances, or because they let people make only small monthly payments.

While nearly half, 48%, stated they blamed themselves for their debt, 34% said they blamed banks and lenders, and the remaining 18% blamed their family and friends.

However, at the end of the day, you are making the choice to charge, and only you know what your budget can cover. Neither your bank, your friends, nor the card itself is doing the spending.

The only time you should use credit is if you have a plan to either pay off your balance monthly or, in the case of, say, a balance transfer, have a solid plan to pay off your balance before your 0% interest period is over.

"Once you've got debt, it's tempting to just pay the minimum repayments, accept credit limit increases or even to use all of the credit that you've been offered and seek additional credit elsewhere," George Charles, spokesperson for Voucher Codes Pro, said in a statement. "Our best advice would be to ... pay more than just the minimum each month."

Simonne Gnessen, money coach and founder of Wise Monkey Financial Coaching, says changing your repayment behaviours is just the tip of the iceberg.

To really make lasting changes, she says, you need to dig deeper and find what triggers your spending.

"Look at your values and experiences and what drives you," she says. "Then you will be able to spend more time doing the things that make you feel fulfilled. You may find that the need to spend money lessens as a result."

To avoid overspending in the future, you could draw up a spending plan, keep a log of your purchases, or use an app to alert you when you go outside a pre-arranged budget, she says.

See related: Buyer's remorse: avoiding credit card purchase regret; Why we impulse spend - and how to stop; The truth about ‘pre-approved' offers

Published: 24 July 2017