@K-in-Boston wrote:
@yfan wrote:why is someone with such high income carrying $40,000 in credit card debt? Under normal circumstances, someone making a quarter million dollars a year shouldn't have any trouble paying off their credit cards.
I hate to keep using the word, but it's relative. I'll be happy to get down to $40k about 2 years from now and I'm just under that for income. Cost of living can differ drastically from region to region, and that doesn't just mean housing.
$40k may or may not be a lot in a relative sense, but it's definitely a lot in an absolute sense. One mistake on $40k would offset 10 good decisions on borrowers with $3-5k outstanding (I know OPs $40k are not all with Chase), or 100 good decisions on people with $400 in outstanding debt. The bigger number is just a bigger risk.
The other thing to keep in mind is that unless they performed a FR, they are just taking the borrower's word about their income of $250k or whatever. They can't be sure about that, and they also can't really know if the income situation has changed recently (job loss, whatever). What they can be sure of is the amount of debt outstanding, and how much progress they are making in payments each month.
I'm just speculating, but their algorithm probably draws a conclusion that people with ample financial means do not willingly incur $5-10k in interest per year on CC debt (if rates are 15-25% on $40k). This could be a red flag for them to limit the relationship.
Lots of great responses here! OP, I would certainly pay down (or better yet, off) the Chase balances to mitigate the damage. Sure it's great to stick it to a lender sometimes, but in this case they may very well just keep balance chasing you which would hurt your scores over time leading to a much higher chance of other lenders taking AA. And if those aren't promotional APRs, you'd be giving them quite a bit of interest as a reward for souring the relationship. I think we all use our own experiences when offering advice here, and I may have been a bit quick to draw parallels due to the high revolving debt and high income similarities. I'm paying my balances down a few thousand a month because I do not have the means to just pay it all off, or to pay off a substantial amount at once. It's pretty well managed and all of my balances are at single digit or 0% APRs thanks to everything I have learned from this board over the past 2 years. I also have an older and thicker spotless profile, so that probably also differentiaites things here as well.
As for taking OP's word for the income, however, it does sound like at least the majority of OP's income is run through their Chase accounts so that is certainly some form of informal confirmation of income. There's also information contained on a person's credit reports that gives lenders and potential lenders some idea of your monthly obligations and your payment history on those so surely that is worked into the algorithm as well.
