Credit limit vs Annual income

[dczech09]

I think that you should change your view on credit cards entirely. There is no reason to have so many credit cards and such hight credit availabilities. It does not help your credit score. While yes, a lower utilization of available credit is good, having so many open and unused credit cards can actually hurt.

All of this available credit also makes it easier to fall into debt. It can also make you more vulnerable to identity theft.

In my opinion, you don't necessarily have an "addiction." You are simply equating a large available credit line with wealth and financial well being. Having a large amount of credit available does not help you financially, whether you use it or not. How can I say it does not help you? Because it is not your money.

Having a lot of credit available would not make me feel good. Having a lot of money available works better.

As for Suze Orman's advice: that is terrible advice that she gave. I find quite a bit of her advice to be questionable.

[snafu]

I learned the hard way, anyone who travels needs 3 CCs. Having booked several flights, car rentals, hotel and an apartment [1st month & DD] for a very busy part work, part holiday summer, I didn't realize they immediately freeze the sums involved on your CC taking it nearly to the limit, 21 days before leaving.

1st destination, I stopped at the bank to exchange currency and was given a royal hassle about my extra ordinarily high CC balance. I discovered only Visa is widely accepted in some countries. Master card wasn't even good as ID. Finally while AMEX is my favorite card, it's useless in SE Asia.

Budget Surgeon: How do you book flights, hotel and car rentals without using a CC? With employers checking credit scores of potential employees, not having as strong FICO score can be the factor that knocks you out of the competition. Even car insurance is asking for credit scores.

[NetSkyBlue]

I guess I don't understand what you need such a large credit limit for. I can't imagine any circumstance where I would ever want or need to put 60 - 100% of my income on a credit card. I do use it for "large-ish" purchases, where I want the points, and for online purchases where I'm uncomfortable putting my debit card info out there, but never charge more than I have in cash, and pay it off immediately.

The most I can ever see needing to spend at one time (and thus putting on the credit card for points) would be a "couple thousand". If I had a large car repair bill, or expensive airline tickets, etc. I would never, ever, ever have to spend $60k at once, except for a downpayment on a house (which I doubt you even can put on a CC).

[disneysteve]

I guess I don't understand what you need such a large credit limit for. I can't imagine any circumstance where I would ever want or need to put 60 - 100% of my income on a credit card.

True, but keep in mind that you shouldn't charge more than 25-30% of your limit and some experts say 20%. So if you earn 50K and have a credit limit of 60% of that or 30K, you need to keep your charges below 30% of that or 18K (12K if you go with the 20% limit). That's still a bunch of money but easier to imagine charging that much.

A few years ago, we took a family cruise. We booked it kind of late so when we booked, we had to pay the full amount all at once. There were 6 of us going. I charged the full fare for 6 people and the other 3 family members paid me back for their share. Without the credit limit, I wouldn't have been able to do that.

[ActYourWage]

Budget Surgeon: How do you book flights, hotel and car rentals without using a CC? With employers checking credit scores of potential employees, not having as strong FICO score can be the factor that knocks you out of the competition. Even car insurance is asking for credit scores.

I realize this was directed at BudgetSurgeon, but I can answer the question. I use my debit card whenever I book a flight, hotel, or car rental without any problems. Also, I don't use CC and my credit score is 800+, however, I am sure that will probably decline over the years, as I don't plan to use CC or borrow money.

[dawnwes]

Oh my. I just calculated that our CCs offer us about 75% of our income. I think I may be calling some of those higher limit cards and asking them to reduce the amount we have available.

I don't like the thought of 75%, even though we never carry a balance.

[safari]

Out of curiosity I added up the credit limits on all my cards and I have a whopping $180,800 total credit limit on 12 cards, which is more than my gross income. I have the highest credit line on my Bank of America card, which is $50,800. I've never ever paid an interest on any of the cards and the only reason I have so many cards is because I applied for them to either get a bonus offer or to get a 0% APR $0 fee balance transfer, which I'd deposit into a CD account to earn interest and then would pay off the balance in full at the end of the 0% APR period. I only use 2-3 cards regularly, while the rest of them have been sitting idle with no activity for years. I keep them all open to have a better average account age. The large number of open accounts and the high total credit line don't seem to have any negative effect on my credit score, rather the opposite.

[MKKShah]

I have the highest credit line on my Bank of America card, which is $50,800.

I am curious to know how got to such a high limit. Do you have a small business? Do you charge a lot (and pay them off) every month? For example, what is the total $ amount that you charge to your CCs?

[disneysteve]

The large number of open accounts and the high total credit line don't seem to have any negative effect on my credit score, rather the opposite.

Definitely. Having a high amount of available credit and managing it responsibly is a good thing. It shows that you aren't out spending wildly. It makes you a much better credit risk.

[safari]

I have the highest credit line on my Bank of America card, which is $50,800.

I am curious to know how got to such a high limit. Do you have a small business? Do you charge a lot (and pay them off) every month? For example, what is the total $ amount that you charge to your CCs?

I don't have a small business and I charge to credit cards anywhere from $2K to $4K a month. I've never charged anything to that Bank of America card because its points program is not very good. I opened that card to get the 0% APR for 12 month on balance transfers. I think they originally approved me for $20K or $25K, but since I had other Bank of America credit cards, I asked them to move the credit lines to the new card and only leave $1,000 credit line on the other cards. That's how I ended up with a $50.8K credit line on a single card. I then took a balance transfer for $50K at 0% APR and deposited it into a CD account. I was doing the same with multiple creditors, so at one point my credit card debt was over $100K. Back then CD's were paying around 4% interest, so I was making an extra $4K a year. My credit score dropped from 800 to 740, since my credit utilization was at about 80%, but it was worth it. After the introductory period ended, I paid off all balances in full and my credit score recovered in about a year.

[bennkar]

Hmmmm, I'm not sure of my credit limit total, but I know it is well over my yearly salary, probably in the range of $100,000. And that's over a dozen credit cards, only one of which has a balance (currently at 0%). I have signed up for various cards for the sign up bonuses, and in the past 6 months I have gotten over $1,000 in bonuses (YMMV). As for my credit score, last I checked it was just over 800. The credit limits came in handy last summer when Chase sent out 0% & $0 fee courtesy checks. I was able to get $15,000 to pay off my mortgage and buy a needed car, and save over $1,000 in interest charges over the two purchases . (The last $3,000 will be paid off next month)

To get that high credit score and offers, I had to be current (and not carry any balances between billing periods) for a number of years. So if you can't keep track of the cards, a high limit may not be a good thing, but it works for some (& me). (And any unused credit cards are locked up in a box in my closet, never to see the light of day!)

[ecoadapt]

I don't really see the point of having an exorbitant credit limit, let alone having so many credit cards

I don't also see the point of having many credit cards and having higher limit. Though, I got it has a lot of advantage.

[kv968]

I don't have a small business and I charge to credit cards anywhere from $2K to $4K a month. I've never charged anything to that Bank of America card because its points program is not very good.

I was actually thinking of getting a BoA CC since they're offering $100 to sign up, 0% interest for the first year (which I never seem to take advantage of), 2% for groceries, 3% for gas and a 10% bonus if you redeem the points into a BoA account which I already have.

Not the greatest point system out there I imagine but when it's better than my Chase Freedom (when not in the 5% quarterly category) and my Capital One.

[MKKShah]

Just wanted to report back. The results of the latest App o Rama is out. My credit limit has increased by 20K to reach 80K. another 30K and I will be at 100% my income, and based on what I heard from CC managers, I could get that most likely after 6 months.

One "upshot" of all this is that I have 0% balance transfer offers upto 40K across cards. Unfortunately, more than half that comes with a 3% (and even 5% in some cases) transfer fee. Only Citi has indicated that they will cap the fee @ $65 for upto 17K. Very very tempting I must say.

[disneysteve]

Only Citi has indicated that they will cap the fee @ $65 for upto 17K. Very very tempting I must say.

I used to play that game before the card companies made the fees a percentage rather than a flat amount. I used to take a $10,000 cash advance from my credt card on the first day of the billing period and deposit that money in a money market account. I'd leave it there for 45-50 days and then pay it back right before the bill was due. I'd pay a few bucks in fees but earn a lot more in interest. Then I'd repeat the process time after time. It was good while it lasted.