What To Do With Low Limit Cards

[Flex1]

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@dragontears wrote:

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@Flex1 wrote:

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@Red1Blue wrote:

Common conception in the industry is cards with higher limits attract lenders to give higher limit cards. Lenders are more inclined to give higher limits to people with higher limit cards. Is it true?

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This is absolutely true. People will always say "well, at least your in the door". Low limit cards get you more low limit cards and high limit cards get high limit cards....

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But the real question is if you have high limits on all your cards but one does that "cause" a lender to give you a low limit?

And +1 @K-in-Boston correlation does not equal causation. 

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Why take the chance? Its like asking would one Citation from the past ruin your chances with getting hired by a particular company. If it's it's possible, then mitigate the risk before it happens.  Just say no to low no to low credit limits.  Unless you have bad or no credit.  

[Anonymalous]

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@OmarGB9 wrote:

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@Flex1 wrote:

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@Red1Blue wrote:

Common conception in the industry is cards with higher limits attract lenders to give higher limit cards. Lenders are more inclined to give higher limits to people with higher limit cards. Is it true?

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This is absolutely true. People will always say "well, at least your in the door". Low limit cards get you more low limit cards and high limit cards get high limit cards....

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Not necessarily. 

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I believe there's at least a kernel of truth in there. I'm not sure it matters much if someone has a bunch of cards with reasonable limits, but we know the credit industry is somewhat wary of young and thin files. Their scores are penalized more for credit seeking, many financial institutions (like Chase) want to see at least a certain length of credit history, and AU cards are often discounted because they want to see how you handle credit. Just as having more cards shows you've learned to manage multiple accounts, and having a longer history shows you're not completely unreliable, having cards with higher limits that are consistently paid off shows you're not using credit to live beyond your means. While my assessment is based on logic not concrete evidence, it seems reasonable to assume it's a factor, at least with some lenders.

I doubt one or two low limit cards have any effect, however. Everyone was new to credit, at some point.

[K-in-Boston]

@Flex1 a better analogy might be to always bring a life jacket when skydiving over a large desert to keep from drowning.  A life jacket may prevent one from drowning, but if there's no body of water present in the air or on the sand it's going a bit overboard (pun intended).  There's no risk that needs to be mitigated when a person's income and credit history supports a large line of credit based upon a lender's underwriting.

Closing an account merely because a credit line falls under X is a pretty bad move if the card gives larger rewards or better terms on a purchase, or if it is positively affecting scores in any meaningful way (such as being considerably older than one's other accounts).

[Flex1]

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@K-in-Boston wrote:

@Flex1 a better analogy might be to always bring a life jacket when skydiving over a large desert to keep from drowning.  A life jacket may prevent one from drowning, but if there's no body of water present in the air or on the sand it's going a bit overboard (pun intended).  There's no risk that needs to be mitigated when a person's income and credit history supports a large line of credit based upon a lender's underwriting.

Closing an account merely because a credit line falls under X is a pretty bad move if the card gives larger rewards or better terms on a purchase, or if it is positively affecting scores in any meaningful way (such as being considerably older than one's other accounts).

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Valid points. But, you're leaving out the emotional trauma ( slightly sarcastic, but only slightly) of having a small line of credit when you know you're worth more, way more.  If you read through this thread you can see it weighs heavily on people.  And it clearly weighs less heavily on the individuals unaffected.  

[K-in-Boston]

Oh certainly I don't think anyone would dispel there can be an emotional aspect to it.  I wrote in another thread about how I almost closed my Target card when it was still at $800 14 years after opening it (it started growing after I thankfully decided not to).  I was annoyed with it, but really there's no other way to get 5% at Target year round so I would only have been punishing myself.  But I did do it with all of my Capital One cards.  Being objective, that probably wasn't the greatest move since I'll be completely losing their age from my reports in a few years and 25+ year-old cards can lend quite an average age buffer.

But as far as scoring penalties the thread began with?  None.  And I have never heard of anyone having an issue with opening new accounts because of the presence of a card or cards with lower limits when they had others more fitting and their profiles supported it.

[Flex1]

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@K-in-Boston wrote:

Oh certainly I don't think anyone would dispel there can be an emotional aspect to it.  I wrote in another thread about how I almost closed my Target card when it was still at $800 14 years after opening it (it started growing after I thankfully decided not to).  I was annoyed with it, but really there's no other way to get 5% at Target year round so I would only have been punishing myself.  But I did do it with all of my Capital One cards.  Being objective, that probably wasn't the greatest move since I'll be completely losing their age from my reports in a few years and 25+ year-old cards can lend quite an average age buffer.

But as far as scoring penalties the thread began with?  None.  And I have never heard of anyone having an issue with opening new accounts because of the presence of a card or cards with lower limits when they had others more fitting and their profiles supported it.

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It may have no impact on approval.  However, in my experience, I strongly believe that with certain institutions, particularly the big banks, that it can and often does have an undesirable affect on the SL the given. 

[OmarGB9]

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@Flex1 wrote:

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@K-in-Boston wrote:

Oh certainly I don't think anyone would dispel there can be an emotional aspect to it.  I wrote in another thread about how I almost closed my Target card when it was still at $800 14 years after opening it (it started growing after I thankfully decided not to).  I was annoyed with it, but really there's no other way to get 5% at Target year round so I would only have been punishing myself.  But I did do it with all of my Capital One cards.  Being objective, that probably wasn't the greatest move since I'll be completely losing their age from my reports in a few years and 25+ year-old cards can lend quite an average age buffer.

But as far as scoring penalties the thread began with?  None.  And I have never heard of anyone having an issue with opening new accounts because of the presence of a card or cards with lower limits when they had others more fitting and their profiles supported it.

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It may have no impact on approval.  However, in my experience, I strongly believe that with certain institutions, particularly the big banks, that it can and often does have an undesirable affect on the SL the given. 

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I personally dont think it affects SLs. My highest limit to date was previously a $2k Navy card. Penfed approved me for $6.5k right out of the gate this past December. That same $2k Navy card was previously my highest limit, and it came on the heels of an "amazing" $1k Merrick bank approval. So, no, low limits don't mean you'll perpetually get more low limits. Obviously every profile is different, but there are numerous DPs on here of people being approved for huge limits eventually even when their current cards have "toy" limits.

We'll never truly know to be honest. We can only speculate.

[bigseegar]

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@OmarGB9 wrote:

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@Flex1 wrote:

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@K-in-Boston wrote:

Oh certainly I don't think anyone would dispel there can be an emotional aspect to it.  I wrote in another thread about how I almost closed my Target card when it was still at $800 14 years after opening it (it started growing after I thankfully decided not to).  I was annoyed with it, but really there's no other way to get 5% at Target year round so I would only have been punishing myself.  But I did do it with all of my Capital One cards.  Being objective, that probably wasn't the greatest move since I'll be completely losing their age from my reports in a few years and 25+ year-old cards can lend quite an average age buffer.

But as far as scoring penalties the thread began with?  None.  And I have never heard of anyone having an issue with opening new accounts because of the presence of a card or cards with lower limits when they had others more fitting and their profiles supported it.

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It may have no impact on approval.  However, in my experience, I strongly believe that with certain institutions, particularly the big banks, that it can and often does have an undesirable affect on the SL the given. 

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I personally dont think it affects SLs. My highest limit to date was previously a $2k Navy card. Penfed approved me for $6.5k right out of the gate this past December. That same $2k Navy card was previously my highest limit, and it came on the heels of an "amazing" $1k Merrick bank approval. So, no, low limits don't mean you'll perpetually get more low limits. Obviously every profile is different, but there are numerous DPs on here of people being approved for huge limits eventually even when their current cards have "toy" limits.

We'll never truly know to be honest. We can only speculate.

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But one could also argue that for PenFed who is one of the CU's known for really good SL's, that $6.5K is a low SL

[Flex1]

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@bigseegar wrote:

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@OmarGB9 wrote:

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@Flex1 wrote:

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@K-in-Boston wrote:

Oh certainly I don't think anyone would dispel there can be an emotional aspect to it.  I wrote in another thread about how I almost closed my Target card when it was still at $800 14 years after opening it (it started growing after I thankfully decided not to).  I was annoyed with it, but really there's no other way to get 5% at Target year round so I would only have been punishing myself.  But I did do it with all of my Capital One cards.  Being objective, that probably wasn't the greatest move since I'll be completely losing their age from my reports in a few years and 25+ year-old cards can lend quite an average age buffer.

But as far as scoring penalties the thread began with?  None.  And I have never heard of anyone having an issue with opening new accounts because of the presence of a card or cards with lower limits when they had others more fitting and their profiles supported it.

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It may have no impact on approval.  However, in my experience, I strongly believe that with certain institutions, particularly the big banks, that it can and often does have an undesirable affect on the SL the given. 

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I personally dont think it affects SLs. My highest limit to date was previously a $2k Navy card. Penfed approved me for $6.5k right out of the gate this past December. That same $2k Navy card was previously my highest limit, and it came on the heels of an "amazing" $1k Merrick bank approval. So, no, low limits don't mean you'll perpetually get more low limits. Obviously every profile is different, but there are numerous DPs on here of people being approved for huge limits eventually even when their current cards have "toy" limits.

We'll never truly know to be honest. We can only speculate.

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But one could also argue that for PenFed who is one of the CU's known for really good SL's, that $6.5K is a low SL

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You are absolutely right.  One could definitely argue that. 

[Red1Blue]

Hi @Flex1 How many account with high limits one should have when they also have some small limit accounts reporting to be able to attract high limit cards? Also what do we define the low end of the high limit cards? Is it $5k is the low end of the high limit cards?