topic Re: practical value of a huge credit limit? in General Credit Topics

practical value of a huge credit limit?

Anonymous — Fri, 18 Nov 2016 20:42:32 GMT

Our friend Brutal Body Shots reminded us on another thread that when the individual credit limit on a revolving account gets high enough it can cause the entire account to be dropped from utilization -- which in turn could lead to a significant change in your CC utilization Thus, for example, the following is conceivable:

* Bob has had an Amex credit card with a 14k Credit limit for a long time, which typically reports a couple hundred dollars.

* He applies for a new card and gets a 5k limit.

* He then makes a softpull CLI request to triple his limit. His CL is now 42k

* A few days later, he puts a 3k purchase on the new card.

* Bob's CC utilization has gone from 1% ($140/$14000) to 60% ($3000/$5000)

That reminded me of the question I ask at the top of this post. I had been wondering about that for a while. Namely....

Is there any practical advantage from trying to raise the credit limit of any particular card past (say) 29k?

Assume that we are not talking about a consumer who needs the card for huge monthly business expenses, or a person who engages in MS (Manufactured Spending), or someone who is outrageously wealthy and might easily drop 30k on a pleasure trip to the Bahamas. Just a regular guy with an income of under 200k.

One use that does occur to me would be if auto dealers are typically ok with you using a credit card to buy a car. If so, then have a Citi Double Cash with a 60k limit would be nice. You could buy a 50k car and get $1000 back tax-free (assuming you paid it off the following month).

Do auto dealers let you do that? Can anyone think of any other practical use for a single CL that is absurdly high?

My feeling is that once you start getting close to having a single tradeline with a CL over 29k, by that time you almost certainly have at least 4-5 credit cards of different rewards types. And once you do, it means you are already using one card for groceries, another for gas, a third for restaurants, a fourth for airfare and hotels, etc. Aside from that example I gave about buying a car, I am having trouble imagining the use for a single tradeline that is particularly big.

Curious to hear if anyone else has ideas.

Re: practical value of a huge credit limit?

Berk — Fri, 18 Nov 2016 21:11:30 GMT

My utilization stays at between 1%-10%. I've never had 60% utilization. I have two cards in excess of 29K and one more getting close. The lowest limit I have on a major card is 14.5K. I am hardly unusual in this. The most practical benefit I can see is more available loans with good rates. If you are not in the market for a new house, car, RV, boat, refi, or any other major purchase, there might not be much of a practical benefit. Large overall available credit, low utilization, and higher scores are, for the most part, theoretical benefits.

Re: practical value of a huge credit limit?

newhis — Fri, 18 Nov 2016 21:25:22 GMT

Do you know what is the limit when a card is dropped from utilization? 30K? 40K? more?

If 30K I may need to call Discover to CLD.

Re: practical value of a huge credit limit?

Berk — Fri, 18 Nov 2016 21:40:55 GMT

My Discover is over 30K and it still reports for utilization.

All three CRA's are reporting my util at 1%.

Re: practical value of a huge credit limit?

Anonymous — Fri, 18 Nov 2016 22:11:21 GMT

@newhis wrote:
Do you know what is the limit when a card is dropped from utilization? 30K? 40K? more?

If 30K I may need to call Discover to CLD.

Where FICO sets that breakpoint could be a number of places. It's probably somewhere between 30k and 50k. It could be different values for different models. Maybe some models it doesn't apply at all.

Re: practical value of a huge credit limit?

Anonymous — Fri, 18 Nov 2016 22:11:57 GMT

@Berk wrote:
My utilization stays at between 1%-10%. I've never had 60% utilization. I have two cards in excess of 29K and one more getting close. The lowest limit I have on a major card is 14.5K. I am hardly unusual in this. The most practical benefit I can see is more available loans with good rates. If you are not in the market for a new house, car, RV, boat, refi, or any other major purchase, there might not be much of a practical benefit. Large overall available credit, low utilization, and higher scores are, for the most part, theoretical benefits.

Hi Berk. How does an individual tradeline with a CL of > 29k get you more available loans and at better rates?

Re: practical value of a huge credit limit?

Berk — Fri, 18 Nov 2016 22:49:59 GMT

It does not - in and of itself.

BTW, my experience with trying to purchase a new car in its entirety on a credit card or charge card was shot down by the dealer both times. I also tried to buy an RV the same way. In all cases I could only make a down payment. Seems like they don't want to pay the fee - can't blame them

Re: practical value of a huge credit limit?

Anonymous — Fri, 18 Nov 2016 22:55:15 GMT

If you go to high end car dealerships where the price is typically non-negotiable they let you use credit cards. I am talking about Maserati, and Lambo level cars here, and even then it depends on the dealership. Friend of mine bought a used G class, and they let him put up to $50k on a CC, the catch being he could only use one card. Although if you are buying the expensive of a car likelihood is you have a CC with that high of a limit.

Re: practical value of a huge credit limit?

Anonymous — Fri, 18 Nov 2016 23:11:09 GMT

The $1500 I'd get back from buying a 75k car at full price would be cold comfort when I had realize and had spent 73.5k on a bleeping car. That's just me though. All my cars thus far have cost under 20k.

A car listing for 60k that I was getting for 40k (due to haggling with the dealer) -- and then getting some additional cash back via the CC purchase -- that makes a big CL sound attractive. But it sounds like CC purchases of cars may only be possible for high end cards purchased at full price.

Re: practical value of a huge credit limit?

lhcole77 — Sat, 19 Nov 2016 00:20:25 GMT

@newhis wrote:
Do you know what is the limit when a card is dropped from utilization? 30K? 40K? more?

If 30K I may need to call Discover to CLD.

All reports I have read on here say > $50K.

My three highest cards are 31K, 30K and 28K. They all report and factor into UTL.

Re: practical value of a huge credit limit?

lhcole77 — Sat, 19 Nov 2016 00:23:19 GMT

@Anonymous wrote:
@Berk wrote:
My utilization stays at between 1%-10%. I've never had 60% utilization. I have two cards in excess of 29K and one more getting close. The lowest limit I have on a major card is 14.5K. I am hardly unusual in this. The most practical benefit I can see is more available loans with good rates. If you are not in the market for a new house, car, RV, boat, refi, or any other major purchase, there might not be much of a practical benefit. Large overall available credit, low utilization, and higher scores are, for the most part, theoretical benefits.
Hi Berk. How does an individual tradeline with a CL of > 29k get you more available loans and at better rates?

Last year I signed leases on a new apartment and a new car. Both times they were amazed at my credit limits (in total) and on individual cards.

I know for a fact this helped me secure excellent deals. They told me it did.

I was even able to negotiate $100/month off my apartment lease due to my credit.

Re: practical value of a huge credit limit?

Thomas_Thumb — Fri, 25 Nov 2016 03:01:40 GMT

@Anonymous wrote:
@newhis wrote:
Do you know what is the limit when a card is dropped from utilization? 30K? 40K? more?

If 30K I may need to call Discover to CLD.

Where FICO sets that breakpoint could be a number of places. It's probably somewhere between 30k and 50k. It could be different values for different models. Maybe some models it doesn't apply at all.

I have had a credit card with a $34.9k CL for 20 years and it has always reported. I believe the limit used to be $35k but that is has gone up to $50k. The high rollers in the CC forum likely can answer the question based on direct experience.

Back I the 80's I knew sales people that would buy cars on company CCs to get rewards [before corporate got wind as disallowed it].

Last year I spoke with a toyota dealer about buying a car and putting $10k down using my AMEX to boost my HB. I was told their policy was $2k max on a card. They don't like paying CC fees. Perhaps I could have offered to make up the fees by paying more - but, what's the point in that.

Undoubtedly YMMV depending on the dealership but, SOP is for dealerships to limit CC payments. I suppose there is also some risk that a card holder could refuse payment/cancel a card as well which would put onus on the dealership to take action. 3rd party loans or leases remove the dealership from direct liability.

Re: practical value of a huge credit limit?

Anonymous — Sat, 19 Nov 2016 03:21:20 GMT

Hi TT. The 35k figure sounds right to me. And it sounds like you pushed your CL up to just under 35k based on that assumption. Also sounds believable that it may have gone up since then.

I'd still be very interested if anyone can come up with a clever cool use for a huge individual CL. It sounds like we are concluding that auto purchase is not gonna be it.

About a year ago there was a really cool way to use an obscenely high CL. Banks, as many of you all know, will permit you to "fund" a new savings or checking account with a credit card. (To fund it just means that first initial deposit.) Furthermore, with some banks and some credit cards, the transaction will be coded as an ordinary purchase (rather than a cash advance). Finally, with a few of these, the funding amount can be a decent size of money. Well, for quite a while Citi was one of these... and there was no limit to how much you could fund the account with by CC. In other words, if you had a Citi DoubleCash with a 100k credit limit, you could fund a Citigold checking account with 100k and get 2k in cashback. You could pull most of that 100k out of your Citi checking and put it somewhere else,for six weeks and have it earn some interest on top of it, all before paying your Citi card in full. You could do that multiple times with various kinds of checking and savings accounts.

Well that was then. Citi ended that this spring I think it was. Now I think they may not permit CC funding at all, or if they do it has a very sharp limit to it.

So anyway, there was a really cool way to use a ginormous CL back in the day with Citi. But no longer.

Re: practical value of a huge credit limit?

Anonymous — Sat, 19 Nov 2016 03:38:12 GMT

@Anonymous wrote:
Hi TT. The 35k figure sounds right to me. And it sounds like you pushed your CL up to just under 35k based on that assumption. Also sounds believable that it may have gone up since then.

I'd still be very interested if anyone can come up with a clever cool use for a huge individual CL. It sounds like we are concluding that auto purchase is not gonna be it.

About a year ago there was a really cool way to use an obscenely high CL. Banks, as many of you all know, will permit you to "fund" a new savings or checking account with a credit card. (To fund it just means that first initial deposit.) Furthermore, with some banks and some credit cards, the transaction will be coded as an ordinary purchase (rather than a cash advance). Finally, with a few of these, the funding amount can be a decent size of money. Well, for quite a while Citi was one of these... and there was no limit to how much you could fund the account with by CC. In other words, if you had a Citi DoubleCash with a 100k credit limit, you could fund a Citigold checking account with 100k and get 2k in cashback. You could pull most of that 100k out of your Citi checking and put it somewhere else,for six weeks and have it earn some interest on top of it, all before paying your Citi card in full. You could do that multiple times with various kinds of checking and savings accounts.

Well that was then. Citi ended that this spring I think it was. Now I think they may not permit CC funding at all, or if they do it has a very sharp limit to it.

So anyway, there was a really cool way to use a ginormous CL back in the day with Citi. But no longer.

It's definitely not $35K. It's at least $50K and could be higher. I have a card at $45K and it counts

Re: practical value of a huge credit limit?

909 — Sat, 19 Nov 2016 05:48:56 GMT

I believe my thread prompted BBS to answer a question that inspired this thread. When asked by Amex what CL I'd like (when I was requesting a CLI) I said what the heck and asked for a $30K increase to $50K, not fully expecting to get it. Amex approved so I'll be sure to check-in when Amex reports and myFICO records the aggregate CL total for my accounts. I hope it increases $30K rather than dropping $20K!

I have no idea what I'll do with a $50K CL because I'm not buying a new car soon. I've also wondered if Amex would just shut you down if they watched you spend a <$5K per month and then spiraled it up to $30K or some such thing, i.e. Is the $50K CL merely an illusion?

Re: practical value of a huge credit limit?

Anonymous — Sat, 19 Nov 2016 08:25:47 GMT

CGID, good thread and nice thought-provoking conversation going on in here!

909, definitely report back once that $50k limit with Amex reports. I and several others I'm sure would like to know if that $50k CL is factored into your overall utilization. If it is, would you be interested in requesting a CLD to $49,500 to see if it then again counts? If so that would verify for certain that $50k is the threshold.

Getting back into the conversation about the practicality of a monster limit for most average guys like the majority on here, I don't really think there is one. Large limits are more or less simply somethin we chase; they are a game of sorts. Everyone would rather have that larger credit limit for whatever reason. More perceived security, greater limit(s) to possibly stimulate other creditors to raise limits, the mere ability for one to fluff their feathers and brag, etc.

I used to buy the argument that monster credit limits were chased because it would lower aggregate utilization. While this may be true during the building [of credit limits] process, I think it's unpractical on the longer timeline. If one is a Transactor and doesn't carry balances [significant anyway] it really doesn't matter what their total credit limits are. If someone has balances of several hundred, say $500 that reports every month on average, there total credit limits could be $6k or they could be $150k and they're going to report single-digit aggregate utilization.

If I'm reporting a few hundred bucks in balances every month across all cards and have a few cards with 5-digit credit limits, I'm at 1% aggregate utilization. If I take one of those cards with say a $15k limit and raise it to $30k guess what? I'm still at 1% utilization. A monster limit doesn't matter. Not if you're a Transactor, which many of us are on this forum as we strongly believe in the practice of PIF.

Re: practical value of a huge credit limit?

Berk — Sat, 19 Nov 2016 12:34:35 GMT

@Anonymous wrote:
CGID, good thread and nice thought-provoking conversation going on in here!

A monster limit doesn't matter.

I guess it all comes down to your definition of "monster." In the realm of modern day finances, 30, 40, even 50K in a credit limit isn't monster to me - and I'm just a regular guy with a regular income and a regular retirement - slap in the middle of the middle class.

Re: practical value of a huge credit limit?

Anonymous — Sat, 19 Nov 2016 14:43:46 GMT

@Berk wrote:
@Anonymous wrote:
CGID, good thread and nice thought-provoking conversation going on in here!

A monster limit doesn't matter.
I guess it all comes down to your definition of "monster." In the realm of modern day finances, 30, 40, even 50K in a credit limit isn't monster to me - and I'm just a regular guy with a regular income and a regular retirement - slap in the middle of the middle class.

Hi Berk! My guess is that BBS is just using "monster" as a convenient shorthand for "vastly larger than any single month's worth of CC spending you will personally ever engage in." I don't think its meant pejoratively, as in scary huge, or in violation of God's laws, like Frankenstein's monster.

So there's nothing wrong about having a card with a "monster" CL. We are just trying to wrap our heads around whether there is in fact a practical advantage for it. (With his usual psychological acuity, BBS mentions "the mere ability for one to fluff his feathers and brag" which may be the real deal.)

I do firmly believe that people should (gently) strive for a decent sized average credit limit (ACL) and a fairly high CL on their highest tradeline, since both of those are scoring factors on some non-FICO models. But the evidence thus far is that once your ACL is 11k you are good to go there. The scoring advantage for having a single big CL is unclear but I would doubt if there is any beyond 21k. And of course those are simply minor factors in some non-FICO models -- they have no scoring benefit for FICO models at all.

Still, I am all for identifying where the breakpoint is for when FICO 8 drops a revolving account due to its CL being too big. Knowledge is just good, right? And if I can know where the breakpoint is, I certainly will nudge at least one card up toward it. (I was hyperconservative and stopped at 24k I think.)

Here's a question though. Suppose I am the sort of guy BBS talks about: always pay my cards in full, and keep my monthly spending on the low end (well under 2k) simply so I can save more (toward retirement, etc.). So imagine me with a total CL of at least 100k plus one more card with a big individual CL of 30k. (So 130k total.) I keep pushing that one card up till it eventually crosses over FICO's line, wherever that is.

So now, from FICO's perspective, my total CL will be 100k. The thing is, my utilization was 2% before and now that the big tradeline has dropped, it is still 2%. I won't see a scoring impact from the change. So how do I know when it is that the big tradeline was dropped?

That's an honest question -- I really don't know and want to know. When people say that they have a card with a 40k limit and that it is still counting toward utilization... how do they know that?

Re: practical value of a huge credit limit?

Berk — Sat, 19 Nov 2016 15:57:12 GMT

@Anonymous wrote:

Still, I am all for identifying where the breakpoint is for when FICO 8 drops a revolving account due to its CL being too big. Knowledge is just good, right? And if I can know where the breakpoint is, I certainly will nudge at least one card up toward it. (I was hyperconservative and stopped at 24k I think.)

Here's a question though. Suppose I am the sort of guy BBS talks about: always pay my cards in full, and keep my monthly spending on the low end (well under 2k) simply so I can save more (toward retirement, etc.). So imagine me with a total CL of at least 100k plus one more card with a big individual CL of 30k. (So 130k total.) I keep pushing that one card up till it eventually crosses over FICO's line, wherever that is.

So now, from FICO's perspective, my total CL will be 100k. The thing is, my utilization was 2% before and now that the big tradeline has dropped, it is still 2%. I won't see a scoring impact from the change. So how do I know when it is that the big tradeline was dropped?

That's an honest question -- I really don't know and want to know. When people say that they have a card with a 40k limit and that it is still counting toward utilization... how do they know that?

Who knows where the break point is on any one card? I know that I have 2 cards with limits North of 30K. Combined, they account for 40% of my total limits. I have around 178K of total credit and about 1.8K in balances reporting. My current utilization is at 1%. I know that both of those higher limit cards are counting towards my overall utilization because the math works - unless, of course, the CRAs round down rather than up. In which case my utilization is being reported inaccurately.

Again, I really don't see a practical value of a larger limit for any one card. However, the debt to credit ratio is still a biggie in factoring FICO scores. I'm also 52 and no doubt view credit a whole lot differently than Millenials or children of the depression say. My father, born in 1930, only ever had one credit card. I can probably count on both hands the number of times I saw him use it. He paid for everything with either cash or a check. For vacations he used Traveler's Cheques. He used to get so upset when the bank increased his credit limit. He just can't understand why anyone would need more than one card - if they need even that. From my perspective they are a convenience and if the banks are going to finance purchases for me or give me free money, all the more reason to use them.

Re: practical value of a huge credit limit?

Anonymous — Sat, 19 Nov 2016 16:16:17 GMT

I would find value in a large limit of $30K+ if I suddently needed to replace my roof, A/C units, and whatever other unexpected household maintenance comes up all at once (hopefully, that doesn't happen), including home renovation projects. I would hope real funds are available to then pay off those costs, but a larger limit card would allow you to cover those costs without having to use multiple cards or wait for payment of one to go through before paying the next vendor/contractor/whatever on a smaller limit card. Of course, you could pay cash, but why not get the points or cash back possible from a card if possible?