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Credit Limit too high?

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BronzeTrader
Valued Contributor

Re: Credit Limit too high?


@UpperNwGuy wrote:

When I first joined this forum, I was surprised by the relentless zeal with which some members were seeking increases to their credit limits.  Realistically, if you pay off your charges each month, you don't need extremely high credit limits.  In my case, unless it is Christmas or a vacation month, my monthly throughput on credit cards is about $2,000.  To maintain a utilization rate of less than 10%, the most credit I should need is $25,000.  Even with a buffer for Christmas and vacation months, the most credit I should need is $50,000. However, I have over $100,000 in credit limit distributed across seven cards.  It's frankly more than I need.  Yet I keep reading about folk who have combined credit limits of $200,000 or $300,000 and are seeking further increases.  I'm not sure what their objective is other than the satisfaction of knowing that banks trust them with high credit limits.


100% agreed.  Someone here has been working to top the $1MM total credit limit mark. It is remarkable.  But it does not serve any financial purpose, other than personal zeal.  Normally lenders look at person's total disposal income.  When you apply for credit, they ask for your income and rent/mortgage payment.  I'm not sure exactly where the sweet spot is, but I image 1x annual income to 2x annual income total credit line would be more than enough for almost everyone.

 

So if I make $100,000 per year, a $100,000 to $200,000 total credit line would be excellent.  

Message 21 of 59
Appleman
Valued Contributor

Re: Credit Limit too high?

I recently asked for a CLD on a combined Cap1 card. There were a few people on the forum who were getting their lines decreased by Cap1 if they had combined their cards and had CLs over $25K. . 

I pre-emptively asked for the reduction from $35K to $25K and I could hear the CSR chuckle when I asked. 

 

I am also at a point where I am selectively reducing my CC portfolio. 

Message 22 of 59
BronzeTrader
Valued Contributor

Re: Credit Limit too high?


@Anonymous wrote:

@BronzeTrader wrote:

 

I asked to decrease my credit lines all time.  This way I can limit my own exposure to certain bank and keep my credit relationship with them open.  Almost no bank wanst to keep a $100,000 or $200,000 credit line open with one single person or family.  Over the past year, I've closed or decrease my total credit line $200,000.

 

I have a dear friend that spends more than 100k per month on a card; do you think the bank wants to cut ties with that person?

 

I think it is reasonable to say that exposure should be based on income, assets, and spending. What multiple of income is reasonable? How much net worth should one have for 100k of revolving exposure at a single bank? What kind of spend should a consumer maintain to keep that kind of line? I think the banks have answers to all of those questions and more, and any that extend the opportunities carefully consider it beforehand.


I agree.  But banks need to see actual spending to lend more credit.  If the person's total yearly income is $50,000 and struggle to pay rent, the bank would not want to land out a CSR with $50,000 credit line.  

 

I spoke with bank analyst all the time.  They say there is no hard limit of total # of cards and total $ credit line.  If that person has the spending, pay on time and stable financial condition, then the bank will lend more and more. Banks are in the business of lending $ to make more $$.  There is no point of rendering a $100,000 credit to someone.  That individual does not spend, then suddently borrow $50,000 to pay medical bills.  Then just disappaers and burn the bank.  This is the credit exposure and risk management.

Message 23 of 59
BronzeTrader
Valued Contributor

Re: Credit Limit too high?


@Anonymous wrote:

 

Interesting post, and I've found this interesting in the time I've been here as well. Personally, I'm seeking 3-400k in total lines with several cards in the 75k-100k range. My regular spending is quite high, and some months are remarkably high. For example, I spent 24k last month across personal cards. Ten percent of total credit lines would be 240k and a non-penalty single card at <30% would be just under 75k. I'd have a hard time convincing any lender to give me that kind of CLI, but it seems pretty easy for people with much lower spend (and presumably income) to get limits well in excess of their needs. Truth be told, I have more than I "need" now. I can pay for anything I want with a charge card, and I have another 100 something k to use on revolvers in any given month. If it wasn't a hobby, I wouldn't bother seeking more credit.

 

Regarding those other people you mention: some of them probably spend double or triple what you do and have lines that accomodate that. Others are just interested in this as a largely harmless hobby. Others are pushing limits up to control ever ballooning utilization.


If you show a clear pattern of spending $20.000 a month consistently, banks will all go after you.  But if you spend most time $2,000 a month, then the banks have to think it over.  They look at your total annual income and total annual spending, not just a single month.  Also, a total 20% credit utilization does not really hurt your credit, if that is just a single month.  Banks know that.

 

If you can't get banks to increase your CLs, it means the banks think you aleady have enough credit.  There is no need to issue more credit.

Message 24 of 59
Anonymous
Not applicable

Re: Credit Limit too high?

We're on the same page, Bronze. I actually think banks are (in general) extending more credit than is prudent to a big percentage of users on myFICO and some other sites I frequent. I wish I knew the answer for each bank to the questions I asked earlier, but there seems to be so little consistency that I doubt any individual that isn't legally gagged can give a fully developed answer.

 

I'm literally right in line with you on the 'reasonable' credit line metric. 1-2x annual (individual) income seems prudent, and would get my credit lines where I'm trying to take them.

Message 25 of 59
BronzeTrader
Valued Contributor

Re: Credit Limit too high?


@dlm0820 wrote:

@BronzeTrader wrote:

 

I asked to decrease my credit lines all time.  This way I can limit my own exposure to certain bank and keep my credit relationship with them open.  Almost no bank wanst to keep a $100,000 or $200,000 credit line open with one single person or family.  Over the past year, I've closed or decrease my total credit line $200,000.

 

I had a Crate & Barrel card from Comenity, which had a credit line of $20,000.  Smiley Very Happy  I'll never buy that much dinnerware.  

 


Why would you EVER consider doing this?  NEVER ask for a decrease.

 

A store card with $20K limit helps with utilization and of course no one would buy that much from Crate and Barrell.  

 

And if you can't manage $200K in credit lines than you have a bigger problem that needs to be resolved.  Decreasing credit lines isn't going to  help that.


I ask for credit descrease all the time.  This is financial descipline.  It helps to manage the zeal for more credit and unnecessary spending.  It shows the bank you are a more financial responsible person and spend within your own means.  It also give you some headroom to get some new cards and get better rewards.

 

The type of cards show a picture of the person's financial situation.  If you show a solid portfolio of cards, decend spending, always pay on time, then banks will approve more cards to you and you get better rewards over time.

Message 26 of 59
UpperNwGuy
Valued Contributor

Re: Credit Limit too high?

I agree with BronzeTrader and climbfire.

Daily Carry: PenFed Power Cash • NFCU Flagship • NFCU More Rewards • Chase Freedom
Sock Drawer: PenFed Promise • NFCU cashRewards • Chase Sapphire Preferred • Chase Freedom Unlimited • United Explorer • UNFCU Azure
Message 27 of 59
BronzeTrader
Valued Contributor

Re: Credit Limit too high?

After chopping 35 cards in 2016 and reducing the total credit line by $200,000, we still have 35-40 cards with a total $450,000 credit line.  When I applied for Merrill+ card, I was asked by BA to move some credit over, which I did.  I did the same when I applied for Chase CSR.  Anything > $500,000 credit line is not really manageable for a common person.  We currently have $120,000 with BA and $160,000 with Chase.  I think we are getting extended with both of them.

 

I understand that it is a totally different story with a pop singer or football star.  Smiley Very Happy

Message 28 of 59
longtimelurker
Epic Contributor

Re: Credit Limit too high?


@dlm0820 wrote:

@noobody wrote:
I am NOT joking.
Since my score is very high, i get sp or auto CLI from us bank all the time. On those two cards, i absolutely not needing 5 dig CL.

Asking for a CLD is beyond ridiculous.  No one will probably ever NEED a 5 dig CL and those that do need it use an AMEX black card.


It's not beyond ridiculous, it's not even ridiculous!   All your statement shows is that you have not thought about or experienced the situations where it makes perfect sense.

 

These include some already mentioned:

 

1) Total exposure with a lender.    You really want the new SuperWonderfulAllGlass (MUCH better than boring metal, although a few teething issues!) card but you already have 3 cards with them with high CLs.   If you apply chances are you won't get it at first.  Yes, with some lenders you could recon offering to close or transfer CL, but with some you can't.   Easier just to reduce CL to maximize chance of acceptance

2) Cases like Cap One.    Guessing, it seems lightly used cards above $30K are at risk of CLD.   Mine went from #35K to $10K.   Maybe if I had asked for a CLD to $25K I would have avoided the bigger CLD.

3) Eyes on the account.   For those with "unusual" spending patterns, you want to avoid manual review of an app.   Like 1) getting total CL and CL with lender within "normal" ranges maximises the chance of automated approval

 

Keeping high CL "for utilization" has always struck me as fairly pointless.  Generally you don't need to maximize score all the time, only for important apps (and especially things like mortgages).  At such times, paying before the statement cuts can usually minimise utilization hits.

 

Are you in the camp of "never close a no-AF card" too?

Message 29 of 59
Anonymous
Not applicable

Re: Credit Limit too high?

Keep the limits high if you don't need to apply for new credit / your utilization are low and stable.

There's no reason to fear high limits unless your balances are high and you are needing to apply for more credit as a loan for an mortgage or other types.
Message 30 of 59
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