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Do I have too much available credit?

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Anonymous
Not applicable

Re: Do I have too much available credit?


@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.


That's a great way to look at it! Based off my new limits I should be just fine then.

Message 11 of 19
Anonymous
Not applicable

Re: Do I have too much available credit?


@iced wrote:

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.


Your right, I'm thinking about consolidating some of the Chase cards in the future. I just got the truck about a year ago in March brand new so the balance is still pretty high. I have a 1.99% with DCU on that loan.

Message 12 of 19
Gmood1
Super Contributor

Re: Do I have too much available credit?

I'd say set it at 100x your monthly spend. Lol .. kidding.😂
As to what has been stated previously, you're more than fine now. No need to sweat it. There's no hard and fast rule on what your credit limits should be. Just try to keep your monthly reported utilization in that 1 to 9% range if you can. You'll be fine.
Message 13 of 19
Anonymous
Not applicable

Re: Do I have too much available credit?


@Gmood1 wrote:
I'd say set it at 100x your monthly spend. Lol .. kidding.😂
As to what has been stated previously, you're more than fine now. No need to sweat it. There's no hard and fast rule on what your credit limits should be. Just try to keep your monthly reported utilization in that 1 to 9% range if you can. You'll be fine.

Sounds good! Thanks.

Message 14 of 19
Anonymous
Not applicable

Re: Do I have too much available credit?

50x monthly spend in credit limits seems excessive to me.  I spend about $5000/mo on credit cards and having $250k in total limits would be way too much IMO.  I'm at about $150k in limits currently and feel it's already overkill.  I've been feeling that way since I crossed about $100k. 

 

I think that 10x monthly spend in  total credit limits is more that sufficient for 99/100 people.  It's also important to recognize that the 1%-9% range is only really important when considering apping.  If you aren't apping any time soon, the 9%-29% range is fine for reporting balances, which would be a huge amount in dollars if your limits are 50x your monthly spend.

Message 15 of 19
Anonymous
Not applicable

Re: Do I have too much available credit?

Too much available credit is an interesting idea, conceptually. I think that the only way someone can have too much credit is if they lack discipline or self-control. I feel that a bank is competent enough to extend the levels of credit that they feel you can handle financially, so if they're willing to approve it and you have enough discipline to live within your means then there should be no difference between having $10k or $10m in assigned credit limits regardless of your income.

 

If you're uncomfortable having any particular amount of exposure then limit it, period. If not, happy adulting!

Message 16 of 19
longtimelurker
Epic Contributor

Re: Do I have too much available credit?


@Anonymous wrote:

Too much available credit is an interesting idea, conceptually. I think that the only way someone can have too much credit is if they lack discipline or self-control. I feel that a bank is competent enough to extend the levels of credit that they feel you can handle financially, so if they're willing to approve it and you have enough discipline to live within your means then there should be no difference between having $10k or $10m in assigned credit limits regardless of your income.

 

If you're uncomfortable having any particular amount of exposure then limit it, period. If not, happy adulting!


Well, you can certainly reach a limit with an issuer where they are unwilling to extend more credit, so to me that is "too much available credit"  Granted that this usually happens within an issuer first ("You have too much credit with us") but there have been a few cases reported here where issuers were concerned about overall credit.

 

So it's not just whether you feel comfortable or not....

Message 17 of 19
Anonymous
Not applicable

Re: Do I have too much available credit?

Serves me right for typing on a phone lol.

20X is fine if your monthly average rarely goes above that. I should have mentioned that my monthly average is about 50% of my monthly maximum because I have some months with very little spend. So $5500 x 20 = $110,000 limits but since I have months with $12,000 spends I'd prefer having $250,000 limits against a typical average month of $5500 but high charge months of double that.

Plus if you're a wage employee with no other incomes, 20X is probably solid. I'm also a landlord and I host paid events so putting some of that stuff on a card to get cash back makes sense but with my mediocre CLs it means a lot of payments made monthly.

I'd feel most comfortable with 7-8 cards around $30,000 limit each. I do PIF always but I'd prefer to get the full interest-free float if possible. Banking say $5500 a year in 1.3% savings account = $72 a year in free additional interest I lose having to AZEO 25 days early! Oven ten years on just that $5500 it's $765 extra!
Message 18 of 19
Anonymous
Not applicable

Re: Do I have too much available credit?


@longtimelurker wrote:

@Anonymous wrote:

Too much available credit is an interesting idea, conceptually. I think that the only way someone can have too much credit is if they lack discipline or self-control. I feel that a bank is competent enough to extend the levels of credit that they feel you can handle financially, so if they're willing to approve it and you have enough discipline to live within your means then there should be no difference between having $10k or $10m in assigned credit limits regardless of your income.

 

If you're uncomfortable having any particular amount of exposure then limit it, period. If not, happy adulting!


Well, you can certainly reach a limit with an issuer where they are unwilling to extend more credit, so to me that is "too much available credit"  Granted that this usually happens within an issuer first ("You have too much credit with us") but there have been a few cases reported here where issuers were concerned about overall credit.

 

So it's not just whether you feel comfortable or not....


Yeah, that's exactly what I said. 

Message 19 of 19
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