topic Re: Do I have too much available credit? in Credit Cards

Do I have too much available credit?

Anonymous — Tue, 07 Nov 2017 18:37:10 GMT

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!

Re: Do I have too much available credit?

simplynoir — Tue, 07 Nov 2017 18:30:01 GMT

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.

Re: Do I have too much available credit?

HeavenOhio — Tue, 07 Nov 2017 18:56:49 GMT

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.

Re: Do I have too much available credit?

Anonymous — Tue, 07 Nov 2017 19:16:58 GMT

@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.

Re: Do I have too much available credit?

Anonymous — Tue, 07 Nov 2017 19:18:35 GMT

@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.

Re: Do I have too much available credit?

jesseh — Tue, 07 Nov 2017 20:20:01 GMT

@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

Re: Do I have too much available credit?

Anonymous — Tue, 07 Nov 2017 20:31:48 GMT

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.

Re: Do I have too much available credit?

iced — Tue, 07 Nov 2017 20:36:14 GMT

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.

Re: Do I have too much available credit?

Anonymous — Tue, 07 Nov 2017 21:00:25 GMT

@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.

Re: Do I have too much available credit?

iced — Tue, 07 Nov 2017 21:06:10 GMT

@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?

Re: Do I have too much available credit?

Anonymous — Tue, 07 Nov 2017 21:32:33 GMT

@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.

Re: Do I have too much available credit?

Anonymous — Tue, 07 Nov 2017 21:31:00 GMT

@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.

Re: Do I have too much available credit?

Gmood1 — Tue, 07 Nov 2017 21:52:35 GMT

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.

Re: Do I have too much available credit?

Anonymous — Tue, 07 Nov 2017 23:25:58 GMT

@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.

Re: Do I have too much available credit?

Anonymous — Wed, 08 Nov 2017 00:15:25 GMT

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.

Re: Do I have too much available credit?

Anonymous — Wed, 08 Nov 2017 01:18:35 GMT

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!

Re: Do I have too much available credit?

Anonymous — Wed, 08 Nov 2017 02:25:06 GMT

@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....

Re: Do I have too much available credit?

Anonymous — Wed, 08 Nov 2017 02:35:37 GMT

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!

Re: Do I have too much available credit?

Anonymous — Wed, 08 Nov 2017 02:54:42 GMT

@Anonymous 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.