credit card limits

[JoyJoy]

Re: credit card limits

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.

Many of my friends have done what you did and said the same thing about keeping up with the interest and terms of the bt. They have made hundreds too. I don't have much to bt with the 0% offers. You say "convenience check" so I gather you can't use a 0% bt check to fund a money market account?

[JoyJoy]

Re: credit card limits

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

LOL Ima you and me both.

[disneysteve]

Re: credit card limits

Many of my friends have done what you did and said the same thing about keeping up with the interest and terms of the bt. They have made hundreds too. I don't have much to bt with the 0% offers. You say "convenience check" so I gather you can't use a 0% bt check to fund a money market account?

I didn't actually do it with 0% offers but with my regular account, whatever the rate was at the time. I would write the check on the first day of the billing cycle. Between the 30-day billing cycle and the grace period, I had about 55 days before the bill for that cycle was due. That was plenty long enough to earn a substantial amount of interest. A month later, I would do it again. Worked out nicely. One of my reward cards even gave reward points on those transactions so I really made out well, but they don't do that anymore. I guess they caught on to me.

[Ima saver]

Re: credit card limits

You guys are so smart!!

[JoyJoy]

Re: credit card limits

I didn't actually do it with 0% offers but with my regular account, whatever the rate was at the time. I would write the check on the first day of the billing cycle. Between the 30-day billing cycle and the grace period, I had about 55 days before the bill for that cycle was due. That was plenty long enough to earn a substantial amount of interest. A month later, I would do it again. Worked out nicely. One of my reward cards even gave reward points on those transactions so I really made out well, but they don't do that anymore. I guess they caught on to me.

Thanks disneysteve for explaining this to me. You used it legally and you were rewarded handsomely for it. I remember when i was in business college years ago that my law instructor told us we could make money by borrowing from our credit cards and investing in stock/money market accounts. Money market accounts were paying 10-12% back then and the cost of borrowing was 5-7% or lower. I think the same method is working today with the low rate cards/0% bt checks. I was reading an article (can't recall which one) where the credit card companies are now watching the people who are just paying the minimum on their cc accounts and putting a lot in savings. I have to find that article. However, when credit card companies like Citibank, HSBC and Capital One give you checks that you can make out to yourself (0%, 1.99%, 2.99%, etc.) then you can still use them as you please. My take on the situation.

[disneysteve]

Re: credit card limits

that is interesting. I've seen it discussed before but didn't really understand what was being done.

I take it in an online account situation, you still have to mail the convenience check to the account holder correct? but then of course at the end of the period, just do an electronic transfer back to your bank account and then pay off the card. I'm I getting it right?

Yep, that sounds right. I was actually using a money market account that I have check-writing privileges from, so I would just write a MM check to pay off the CC. But that was before so much of our banking was electronic.

[36-666]

Re: credit card limits

I have couple cards...

[Ima saver]

Re: credit card limits

Wow, I guess the next question is how much do you have charged on the cards?

[36-666]

Re: credit card limits

My primary card is promptly paid in full.

[Ima saver]

Re: credit card limits

I would not close them either. If you pay off your card each month, then you are in great shape. I have never been given a limit of over $20,000 but I am assuming that is because we do not make a lot of money.

[36-666]

Re: credit card limits

I might close a few cards slowly over time.

[poundwise]

Re: credit card limits


I was going to stay out of this thread, however, I will point out (again) that no component of the credit scoring system utilizies your total available credit as a determining factor to your score.

The only area where having more open credit helps is if you carry a substantial balance, in which case having a higher total available credit limit would help you when it comes to the proportion of credit lines used, which is a factor.

However, another factor is total amount owing on accounts. So, if you have a $10K total limit with $1K usage, then you have a 1:10 ratio. The credit score system sees a 1:10 proportional ratio of credit lines used with a total amount owing of $1K.

If a person is using more credit, THEN having a higher total available credit line WILL help their proportion of credit lines used. However, the use of more credit will reflect negatively on the component of the score which considers the total amount owing.

That is, if you have $50K total limit with $5K usage, then that would be the same ratio as the above example, 1:10. The higher available credit line has balanced out the higher usage so that the ratio is good. However, the credit score also considers the fact that there is $5K total amount owing, which is not reflected in the credit score as well as the first case, which had only $1K owing.

At myfico, you can see that 30% of your score is category called 'Amounts owed.' It is within this category that both the proportional ratio and the total amount owed, along with some other factors, figure in.

To me, this means the notion of reaching for ever greater credit limits in order to raise your credit score is a waste of time. Taking care to watch your proportional ratio while keeping usage down is more prudent.

Of course, other factors apply. Payment history is the largest category along with length of credit history, new credit, and types of credit used.

[timl]

Re: credit card limits

I currently have 15 credit cards with a total credit limit of $222,800. The largest credit limit on any one card is $50K. I do this to take advantage of 0% offers, currently I have over $80K borrowed at 0%, invested in 5% savings accounts, although most of them wind up this summer. I did just get another 0% offer for 1 year, no fees, for $18K which I will take advantage of.

Yes, this probably hurts my credit score a bit, but I already have a house with a long term mortgage so I dont care. If i needed to refinance I could just simply pay off the debt and wait a few months for that to be reflected in my credit score, until then I will just keep making the free interest. I also try to take advantage of airline credit cards, United and American have cards that allow you to get 15 - 20,000 or so miles that you can apply for every year or so, I wait for the first year annual fee waived offers and then cancel before the year is up. Often if you try to cancel early they will give you another 5,000 miles to stay, I take that and then cancel for good once it posts.

Its incredible the offers that come up, the US Airways Visa (bank of America) just gave me 25,000 miles to keep their card (Juniper bank is issuing a competing card, I asked B of A to match their offer), and then had a 0% offer where they also gave you more miles for the balance transfer. So I transferred $20,000. So I got a total of 45,000 miles and around $400 in interest for zero cost for that one card alone.