Do I have too much available credit?

Anonymous · ‎11-07-2017

Hello Everyone,

So as of October, I am completely credit card debt free. It took a long time and a lot of budgeting, not over spending like me and my fiancee did before, and a little bit of things to go our way. But we finally did it. I am now looking towards the future and I wanted to see if I now have too much available credit at my disposal. I don't plan on purchasing anything major in the next couple of years but I have always heard of people closing credit cards because they have too much available credit when purchasing a home mainly. So hopefully anybody here with some info on Mortgage Lending can tell me if I would look like I have too much available credit in case we wanted to purchase a second home in 2 years+. Here is my info.

Annual Income - 108000

Mortgage - Bal 138000 - Refi Jan 2016

DCU Car Loan - Bal 26000

Credit Cards

Citi Costco Anywhere Visa Sig - CL 9500 - I use this one for everything and let about 1K to 2K report a month and I pay it off at the due date.

Opened April 2017

Disney Chase Visa Sig - CL 10500

Opened March 2014

Chase Freedom Visa Sig- CL 9000
Opened Feb 2016

Discover IT - CL 6200

Opened March 2013

AMEX Everyday - CL 5000

Opened Feb 2015

Citi Double Cash WMC (Used to be Citi Dividend) - CL 530 - First Card I ever applied for and the limit never went up from 500 to 530 but I still kept it.

Opened Jan 2008

Chase Freedom Unlimited Visa Sig - CL 17000

Opened Nov 2017

Citi Double Cash WMC - CL 10600

Opened Nov 2017

As you can see, the reason I ask this question now is because of the recent apps that I just got approved for about a week ago. I apped for the Chase Freedom Unlimited because of a $300 bonus after 3 months of at least $500 spent. And I apped for a second Citi Double Cash hoping that down the road I can move that credit limit to my oldest card and close the new one. I just called them and they said it is possible and to give them a call.

So, do I have too much available credit now and could this be a problem down the road if we wanted to purchase another home in 2+ years?

I would really appreciate any answer.

Thanks!

simplynoir · ‎11-07-2017

I personally think you have the right amount of cards and limits if you don't want to get any more in the future. As long as all the cards there are useful to you in some capacity there's nothing wrong with staying pat.

HeavenOhio · ‎11-07-2017

You're fine. One can easily have more than his annual income in limits, and you're not there yet. The only thing I'd watch for is adding too much credit in a short period, and I'd say you're fine in that department too.

Anonymous · ‎11-07-2017

@simplynoir wrote:
I personally think you have the right amount of cards and limits if you don't want to get any more in the future. As long as all the cards there are useful to you in some capacity there's nothing wrong with staying pat.

Thanks! The only one I don't really see much benefit is the AMEX. All the others I do see a benefit in keeping them open.

I've always thougth about apping for the CSP just for the bonus but my itch to get it has cooled down as of late.

Anonymous · ‎11-07-2017

@HeavenOhio wrote:
You're fine. One can easily have more than his annual income in limits, and you're not there yet. The only thing I'd watch for is adding too much credit in a short period, and I'd say you're fine in that department too.

Awesome and yeah not thinking of adding anything else anytime soon.

jesseh · ‎11-07-2017

@Anonymous wrote:
The only one I don't really see much benefit is the AMEX.

Well, I'm afraid your username would become an issue if you didn't have an amex

Also, having a good membership relationship with amex doesn't hurt, amex is known for saying they value long-term relationships

Anonymous · ‎11-07-2017

I think for a person who actually does pay their balances monthly so no interest accrues ever, a good number for available credit is 50 x your monthly spend on credit cards (that is paid off to avoid interest).

If you never, ever pay interest, and you put $5500 on your cards monthly and pay those in full always and forever, having $5500 x 50 = $275,000 in total limits makes sense to me.

This is because even if you pay in full every month, you really never want to report more than 8.9% utilization at statement cut. That means you need an absolute minimum of $62,000 in credit limits so your monthly spend is below 8.9% aggregate, giving you an extra few weeks of interest-free "float" to pay the balances off in full.

But...there is no perfect rewards card. I think there are always 5-7 rewards cards out there that may make sense to use for different purchases at different times. Because you never know WHICH rewards card you'll use in a given month, I think it makes sense to have credit limits that may see you using any one particular card for up to 60% of your monthly spend.

That's pretty much why I think 50x monthly spend makes sense -- you can maximize rewards earning and increase your interest-free "float" days so your money that's banked in high interest checking/savings is earning interest for you.

iced · ‎11-07-2017

Your total credit limit looks appropriate for your income, though I think you have 4-5 cards too many. 3 or 4 solid cards is all you really need, but it's pretty harmless if you have a few more. The only area of concern I see is your car loan - that's a large balance given your income.

Anonymous · ‎11-07-2017

@jesseh wrote:
@Anonymous wrote:
The only one I don't really see much benefit is the AMEX.
Well, I'm afraid your username would become an issue if you didn't have an amex

Also, having a good membership relationship with amex doesn't hurt, amex is known for saying they value long-term relationships

Very true! lol. I'll keep it. I'm very easy to convince lol.

iced · ‎11-07-2017

@Anonymous wrote:
I think for a person who actually does pay their balances monthly so no interest accrues ever, a good number for available credit is 50 x your monthly spend on credit cards (that is paid off to avoid interest).

If you never, ever pay interest, and you put $5500 on your cards monthly and pay those in full always and forever, having $5500 x 50 = $275,000 in total limits makes sense to me.

This is because even if you pay in full every month, you really never want to report more than 8.9% utilization at statement cut. That means you need an absolute minimum of $62,000 in credit limits so your monthly spend is below 8.9% aggregate, giving you an extra few weeks of interest-free "float" to pay the balances off in full.

But...there is no perfect rewards card. I think there are always 5-7 rewards cards out there that may make sense to use for different purchases at different times. Because you never know WHICH rewards card you'll use in a given month, I think it makes sense to have credit limits that may see you using any one particular card for up to 60% of your monthly spend.

That's pretty much why I think 50x monthly spend makes sense -- you can maximize rewards earning and increase your interest-free "float" days so your money that's banked in high interest checking/savings is earning interest for you.

I don't follow the 50x logic. Following your reasoning, it seems 15x-20x would be just as good.

Factoring in your concern that any one card should be able to handle all of the spend in a month, and assuming one keeps as many as 7 cards, having those 7 cards each with a $10,000 limit ($70,000 total) is well under 50x while keeping utilization on any one card under 60%. You could even have 5 cards at $20,000 and comfortably avoid both the total utilization risk and the individual card risk and still be only at 20x spend.

Am I missing something here?