"What’s the point in having 100k in limits if you can’t spend it?"

[reluctantgarden]

Apologies to mods if this isn't proper, but there's a post on the r/CreditCards subreddit with the above subject, and I thought it would be interesting to see what folks here have to say. My response was as follows:

The reasons why I have a $400k TCL are fivefold:

1. Utilization becomes a nonfactor. Although I never pay interest, I do like using 0%-APR BTs given how well HYSAs are paying. Right now I'm running $27k across three offers, but still only have less than 7% utilization, so...

2. ...my FICOs stay high, currently 775-780.

3. Flexibility if anything hits the fan: If something bad happens personally, I can weather it without wrecking my credit. And if something expensive (but not necessarily horrible) happens, I can finance it myself at a low rate ($59.9k CC at 9.9% APR, $27.1k BLOC@9%).

4. Stickin' it to the man for rewards after many years of paying interest: I got myself together financially a couple of years ago, and now I'm obsessed with getting as many points and as much cash back as possible.

5. Gamification, or me vs. the algorithms: I'm also obsessed with how high I can push CLs and how many tradelines are possible given my scores and income. The latter is maxed out for at least a year since I recently added four CCs and a LOC, but the former continues on given they're all SPs.

[ptatohed]

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@reluctantgarden wrote:

Apologies to mods if this isn't proper, but there's a post on the r/CreditCards subreddit with the above subject, and I thought it would be interesting to see what folks here have to say. My response was as follows:

The reasons why I have a $400k TCL are fivefold:

1. Utilization becomes a nonfactor. Although I never pay interest, I do like using 0%-APR BTs given how well HYSAs are paying. Right now I'm running $27k across three offers, but still only have less than 7% utilization, so...

2. ...my FICOs stay high, currently 775-780.

3. Flexibility if anything hits the fan: If something bad happens personally, I can weather it without wrecking my credit. And if something expensive (but not necessarily horrible) happens, I can finance it myself at a low rate ($59.9k CC at 9.9% APR, $27.1k BLOC@9%).

4. Stickin' it to the man for rewards after many years of paying interest: I got myself together financially a couple of years ago, and now I'm obsessed with getting as many points and as much cash back as possible.

5. Gamification, or me vs. the algorithms: I'm also obsessed with how high I can push CLs and how many tradelines are possible given my scores and income. The latter is maxed out for at least a year since I recently added four CCs and a LOC, but the former continues on given they're all SPs.

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Yes but most of those replies aren't necessarily defending why anyone should have limits over $100,000.  Maybe #1 (though utilization can be kept low with limits under $100k) and for sure #5, lol.    But, 2 - 4 can easily be achieved with a 5 figure TCL. 

[reluctantgarden]

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@ptatohed wrote:

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@reluctantgarden wrote:

Apologies to mods if this isn't proper, but there's a post on the r/CreditCards subreddit with the above subject, and I thought it would be interesting to see what folks here have to say. My response was as follows:

The reasons why I have a $400k TCL are fivefold:

1. Utilization becomes a nonfactor. Although I never pay interest, I do like using 0%-APR BTs given how well HYSAs are paying. Right now I'm running $27k across three offers, but still only have less than 7% utilization, so...

2. ...my FICOs stay high, currently 775-780.

3. Flexibility if anything hits the fan: If something bad happens personally, I can weather it without wrecking my credit. And if something expensive (but not necessarily horrible) happens, I can finance it myself at a low rate ($59.9k CC at 9.9% APR, $27.1k BLOC@9%).

4. Stickin' it to the man for rewards after many years of paying interest: I got myself together financially a couple of years ago, and now I'm obsessed with getting as many points and as much cash back as possible.

5. Gamification, or me vs. the algorithms: I'm also obsessed with how high I can push CLs and how many tradelines are possible given my scores and income. The latter is maxed out for at least a year since I recently added four CCs and a LOC, but the former continues on given they're all SPs.

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Yes but most of those replies aren't necessarily defending why anyone should have limits over $100,000.  Maybe #1 (though utilization can be kept low with limits under $100k) and for sure #5, lol.    But, 2 - 4 can easily be achieved with a 5 figure TCL. 

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Very true, but we worst-case-scenario types need $100k x at least 4. And in a few cases around here, multiples of that

[CYBERSAM]

"What’s the point in having 100k in limits if you can’t spend it?" IF you don't have an income! That would be more appropriate question!

But if you are using credit then why not have high CL? 

[Anonymous]

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@reluctantgarden wrote:

Apologies to mods if this isn't proper, but there's a post on the r/CreditCards subreddit with the above subject, and I thought it would be interesting to see what folks here have to say. My response was as follows:

The reasons why I have a $400k TCL are fivefold:

1. Utilization becomes a nonfactor. Although I never pay interest, I do like using 0%-APR BTs given how well HYSAs are paying. Right now I'm running $27k across three offers, but still only have less than 7% utilization, so...

2. ...my FICOs stay high, currently 775-780.

3. Flexibility if anything hits the fan: If something bad happens personally, I can weather it without wrecking my credit. And if something expensive (but not necessarily horrible) happens, I can finance it myself at a low rate ($59.9k CC at 9.9% APR, $27.1k BLOC@9%).

4. Stickin' it to the man for rewards after many years of paying interest: I got myself together financially a couple of years ago, and now I'm obsessed with getting as many points and as much cash back as possible.

5. Gamification, or me vs. the algorithms: I'm also obsessed with how high I can push CLs and how many tradelines are possible given my scores and income. The latter is maxed out for at least a year since I recently added four CCs and a LOC, but the former continues on given they're all SPs.

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While the above are certainly the most common reasons, the only thing that gives me pause is that there is no obvious stopping point, basically for most of the reasons you should always add more.  $400K TCL?   Peanuts!   Get into a $10M accident/liability/medical payment, you are toast.   So better start apping and getting CLIs until you get to a respectable $10B+

I think the issue really is 3: Flexibility if anything hits the fan: If something bad happens personally, I can weather it without wrecking my credit.  At some point, my $10M example, even if you have the TCL to cover the cost initially, there may be no way to even make that first payment, so the flexibility is somewhat limited.    That said, if a loved one needed a single dose of a $10M drug, there is value in getting it, then worrying about the inability to pay later.

So I would guess a "good" target TCL is related to what your income would actually let you handle minimum payments on, with some fudge factor.   Otherwise it is for posting on forums like this.

[reluctantgarden]

You make a good point about the CL amount that could be maxed but still paid by income (assuming a common 2% of CC balance as minimum payment due). So my TCL that could actually be used/maintained is about $250k. Another argument for gardening! lol

[Beefy1212]

@reluctantgarden just as an aside there is a dollar amount penalty not related to tcl or icl limits MyFICO even said so in their AMA sometime back. 

This number is generally assumed to be in 5k segments.

Will give you another reason to have stupid high limits. Mortgage revolving credit utilization. The CRAs do not factor very large cards on revolving utilization IIRC ex is 25k TU/EQ 27k if needed you can hide usage on cards not reflected in your score.

Of course this will change when the enterprises switch to F10T and VS4. For now though having high limits can help you get a better rate on a mortgage.

I really like your 5th point I have been sport apping for a bit now.

[redpat]

My guess is for the sport of it.  Even if someone has $800k of CLs I would assume AA would probally start between 100k and 200k without large payments and income to support it.  Lol, it's like the stock market what goes up, can go down.....

[Guyatthebeach]

@reluctantgarden,

I'm going to have to check that post out for the comments.  Personally I agree with all those reasons.  After surviving my chapter 7 bankruptcy, I promised myself to never accumulate debt I can't afford to pay off. I use my business lines of credit(totaling $500k) wisely, and usually paid off within 60 days.  With my personal credit cards and LOC's, my utilization is always under 1%.

I just have a thing of maxing out my rewards. Why use my money when I can use someone's, pay it off in about 30 days, getting anyway from 2 to 6% cash back?

Guyatthebeach 

[reluctantgarden]

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@Guyatthebeach wrote:

@reluctantgarden,

I'm going to have to check that post out for the comments.  Personally I agree with all those reasons.  After surviving my chapter 7 bankruptcy, I promised myself to never accumulate debt I can't afford to pay off. I use my business lines of credit(totaling $500k) wisely, and usually paid off within 60 days.  With my personal credit cards and LOC's, my utilization is always under 1%.

I just have a thing of maxing out my rewards. Why use my money when I can use someone's, pay it off in about 30 days, getting anyway from 2 to 6% cash back?

Guyatthebeach 

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Exactly! And congrats on the massive BK rebound.