credit card limits

[autoxer]

Re: credit card limits

poundwise, maybe there's a third thing that's infinite ... the number of factors that go into a mortgage lender's determination ...

I agree with the theme that nearly limitless limits can be counterproductive. Lenders also consider available credit in relation to salary (FICO does not have salary info). If you earn $45,000/yr but can charge up to $60,000, their warning bells go ding, ding, ding ...

vsjhoc

Here's another ratio: My credit limit of all my cards totaled is less than half of my annual income. Is that reasonable in the eyes of a mortgage lender? My utilization is less than 10% and I have a plan in place to knock that down to 1% over the next two months. Most of my debt is at 0% interest, and the rest is at 3.9%, but I still feel increasingly uncomfortable carrying debt.

[JoyJoy]

Re: credit card limits

Here's an interesting article from Smart Money called "The Sky's the Limit"

http://smartmoney.com/print/index.cfm?printcontent=/ask/index.cfm?story=20040729

[poundwise]

Re: credit card limits


Good article and nicely summarized points.

Also, I want to comment here to the posters in this thread. I think it is great that we could each have differing opinions, though it seems we agreed more than it may have appeared at first, without the thread degrading into pointless argument or bickering. I appreciate it and enjoy the discussion.

[PrincessPerky]

Re: credit card limits

have any one purchase a car on their high limits with a balance transfer fee free, with a 0% offer and keep balance transfering year to year until they paid it off. so they paid 0% intrest on their car

Balance transferrs come with a fee usually, so it wouldn't be zero percent exactly...

But if I had the cash to buy a car, I might consider putting it in a savings account and leaving it there while it earned interest, then sending it off to the CC at the end of the promotion...might, but then I am pretty lazy, and absentminded, so this is prolly not a strategy for me.

[vsjhoc]

Re: credit card limits

Here's another ratio: My credit limit of all my cards totaled is less than half of my annual income. Is that reasonable in the eyes of a mortgage lender? My utilization is less than 10% and I have a plan in place to knock that down to 1% over the next two months. Most of my debt is at 0% interest, and the rest is at 3.9%, but I still feel increasingly uncomfortable carrying debt.

We all have very different levels of comfort with debt. Some people are so anxious that they refuse to have credit cards at all. Other folks think nothing of carrying $100,000 in debt. You're a product of how you were raised, your actual life experiences to date, blah blah blah.

I was oversimplifying the income ratio point. It's not just how much you make, but also how much you owe. Mortgage lenders do two more calculations. They compare your monthly housing expenses (mortgage principal and interest, taxes, and insurance) to your gross monthly income. They typically want this figure to be less than 28%. They also consider your monthly housing expenses, plus car payments, credit card payments, and any other monthly debt payments, and compare this to your gross monthly income. They typically want this to be less than 36%. Before you grab that pen and paper, try the housing affordability calculator at the Bankrate site at http://www.bankrate.com/brm/calc/newhouse/calculator.asp[/URL]

Just give me the darn house, right?!

vsjhoc

[mehrlin]

Re: credit card limits

I have to agree. You don't get those kinds of credit limits without using the actual credit.

https://www.cut-credit-card-debt.com

[slimcustomer]

Re: credit card limits

I'd like to have credit limits like these - link.

[JoyJoy]

Re: credit card limits

I'd like to have credit limits like these - link.

My goodness!! What does that first poster need with all those HIGH CREDIT LIMITS???

[PrincessPerky]

Re: credit card limits

According to the first post..

"A. more buying or balance transfer power

B. credit scores will be higher because % utilization of existing limits will be lower

C. other higher limits and line increases will generally be more readily approved, given that your report shows others have trusted you with higher lines. (I have even had institutions that normally require income documentation (penfed.org, for example) forgo this entirely once they pulled our credit and saw the presence of several high-limit lines on it.)"

I dunno that I agree with it, but that seems to be theiir rational.

[slimcustomer]

Re: credit card limits

why exactly? (I'm genuinely curious)

To make money with. In the past, I had taken advantage of 0% credit card offers to invest in short term cds to make a little extra cash in order to finance an IRA contribution when I was temporarily short on funds. Then I found out that people were taking this to a whole different level and making serious money. Obtaining large credit lines and then reallocating them to new 0% offers is a powerful way to make extra money. Not every one has $100,000+ in the bank, but by exploiting these offers to the fullest, you can earn income as if you did.

[disneysteve]

Re: credit card limits

Obtaining large credit lines and then reallocating them to new 0% offers is a powerful way to make extra money. Not every one has $100,000+ in the bank, but by exploiting these offers to the fullest, you can earn income as if you did.

I used to do this. I would write a "convenience" check to a money market account and collect interest for a couple of months and then pay the CC bill. There was a transaction fee for the transfer, but it was much less than the interest I was earning. I made hundreds of dollars doing that.

[Ima saver]

Re: credit card limits

Sounds like a good idea, but so far, I have been too chicken to try it.

[disneysteve]

Re: credit card limits

Sounds like a good idea, but so far, I have been too chicken to try it.

You just have to be sure to pay the bill on time or else you get hammered with interest and fees. Also, read the fine print on the transfers very carefully so you understand what fees you will be charged.

[TBH]

Re: credit card limits

Back to the original question, here are my limits:

CC1: 10,000 (primary card--use for gas, groceries, drugstore--5% back)
CC2: 7900 (secondary card--use for everything else--1% back)
CC3: 6000 (never use--mileage card)
CC4: 5000 (use only for small monthly bill to keep account active--worldpoints rewards)
CC5: 1500 (store card, use four or five times a year)

Total available credit: $30,400

I have never carried a balance on any card (due to good luck and maybe a little bit of money smarts), but I didn't realize until very recently that it's not a good idea to close long-standing cards or open new cards too often. So I think my credit limits are so low because of that. I shuffled my credit cards around a lot in the past year when it dawned on me that I could be getting cash rewards instead of airline miles. I am now very satisfied with the cards I have and now I just need to sit tight and let the credit history lengthen. I would like to have one really high-limit card for a big emergency, but I don't want the limits on the other cards to go up too much because it seems like a security risk.

I do think it's good to have reasonably high limits for emergencies, because my emergency fund is in ING direct. In a true emergency, I'd have to charge things on my credit card while waiting for 3 days or whatever for the $$ to transfer into my checking account. So I'm happy with my 30K of available credit. Much less than that and I'd be nervous that I couldn't deal with a major calamity.

Here's more on my credit card philosophy.

[boefixepa]

Re: credit card limits

Poundwise...thank you...It gave me warm fuzzies to know someone agrees with me for the most part....it's such an odd occurance.....

And really I agree with you. I could just see how if you were still working on building your emergency fund and didn't have much of a nest egg, how CC could be a viable safety net for really big emergencies. I think it's rather silly how I can jump from a 2K credit limit to a 10K credit limit for no apprent reason, just a 10 year anniversary of having the card?? Then the next one is 8K...go figure. I don't use them except for bugeted expenses and then they are paid off everymonth. The 0% gets floated until that is over and then paid off. So like I mentioned I can't imagine charging them up. I have a total of 4 cards with close to 30 K and if they had balances that high I'd be dead from stress. I can pay all of them off in cash at any given moment and that is what I like! If I can make a few buck off them...all the better!