CLDs - Am I the only one?

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Brad Bishop
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CLDs - Am I the only one?

Postby Brad Bishop » Wed Dec 24, 2014 11:52 am

CLD - Credit Line Decreases:

I used to have two cards with a credit limit of $25K each on them. I called up the bank and said, "Look, just ratchet that back to $10K for each, which is far more than I need, and set up my account for no further auto-increases."

I've done this on several cards over the years as I really don't ever want to owe a bank $25K in unsecured debt. Even with the $10K cards the most I've gotten one up to at any one point is $7K for setting up a home office and it was quickly repaid after.

Now, I know someone is going to say, "FICO - credit utilization," and, technically, you have a point. In practical terms, the $7K on a $10K account lasted 3-4 months and was wiped out.

So, with everyone constantly going on and on here about CLIs, I'm just wondering if I'm the only one with CLDs, not inflicted upon me, but purposely chosen because I don't want to be on the hook.


PhoenixDown
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Postby PhoenixDown » Wed Dec 24, 2014 12:13 pm

I get your reasoning but I'm in the camp of be prepared just in case and want multiple high lines of credit. Its all good :)

ingramjuan
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Postby ingramjuan » Wed Dec 24, 2014 1:04 pm

I somewhat agree with you, but being responsible also I would have just kept the high credit limit for what ever may come up.
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popamode72
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Postby popamode72 » Wed Dec 24, 2014 1:28 pm

I can see your logic behind it but I think I'm fine with having high credit limits just in case something happens. Maybe if I was in a situation where I was trying to churn multiple Citi cards and needed more I'd consider decreasing my CL with them to make future approvals easier but otherwise, I'm content with what I have. I actually read that someone actually did this too.
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MB131174
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Postby MB131174 » Wed Dec 24, 2014 1:42 pm

I can see Brad's logic and actually agree with it. He knows what debt he's comfortable with and disciplined to keep it as such. I think $10,000 is more than reasonable. If you find yourself in an unexpected $25,000 emergency, you have a lot more to worry about than utilization and limits. If I were to find myself in a $25,000 emergency that required a credit card I've either done something highly illegal, or have completely ticked off the wrong individual.

On another note: some folks find that the more available credit they have (especially at promotional interest rates) the more unnecessary money they spend. I myself am guilty of this. "Oh look, 0% for 18 months!" Next thing I know I'm online booking a vacation. Been there. Done that. Hopefully never again. I'm still paying for it. Thank goodness Slate had 0% for 15 months on BT and purchases and no transfer fee. I'm still paying for that mistake. The card has a $15,000 limit, but I was smart. I transferred the balances on my soon to be expiring 0% cards to the Slate and gave the card to my parents to hold onto. No, I did not write down the account number. I'd have been tempted to online shop.
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Carmy3
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Postby Carmy3 » Wed Dec 24, 2014 1:55 pm

I have a credit card limit ceiling. I don't want any cards above 10k for the same reasoning as you.
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capital one quicksilver-10k(everyday), discover it-8k(rotating categories),
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PlyrStar93
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Postby PlyrStar93 » Wed Dec 24, 2014 3:49 pm

I understand you are trying to restraint yourself from spending too much, actually a very good point and move, but what works for you doesn't necessarily work for me.

Having 4 cards now, I never let my utilization go above 10% at any time (even without paying before statements cut), now it's just 1% or 2% normally. So does this mean I should shrink my limits to 10% of what I have now? I don't think so, at least. I don't have an upcoming travel plan or big purchase or anything else, but once they come up I will be pretty much doomed if I don't have enough credit limit on my cards. I pay in full each month because I only spend what I can afford, and whatever big purchases are evaluated before spending.

When I was approved for Amex and found that they approved me 8k, which was far more than I expected, I was shocked at that time, and thought similar as you -- Amex can you actually decrease my limit to blah blah blah, because 8k is far more than what I need now. Shortly after getting my card, I went to a travel and figured out how useful that limit was. Utilization is just one small point there to prevent maxed out cards lead to adverse actions, but backup is far more important. Maybe I have to buy something expensive or pay for emergency in the future, who knows, but in that situation I probably need a single card with 20k or whatever.

Currently I have 20k in total CL, but that never means I will spend that much each month, or max them all up and pay over time. I can manage my spending to only what's necessary and affordable to me, so cutting CL to meet spending pattern is not applicable in my case. However, I never say you made a bad choice, as you feel like what you have done is good for yourself, it works out and it's fine. Having your own financial choice is the best way to manage your finance sometimes.
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Brad Bishop
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Postby Brad Bishop » Thu Dec 25, 2014 7:17 am

MB131174 wrote:I can see Brad's logic and actually agree with it. He knows what debt he's comfortable with and disciplined to keep it as such. I think $10,000 is more than reasonable. If you find yourself in an unexpected $25,000 emergency, you have a lot more to worry about than utilization and limits. If I were to find myself in a $25,000 emergency that required a credit card I've either done something highly illegal, or have completely ticked off the wrong individual.


That's my thought. If I find myself in a $25K emergency then I may want to just work out a payment program with whomever I owe that money to (like a hospital or something of the sort). I don't think just plunking it on the credit card is going to help me.

MB131174 wrote:On another note: some folks find that the more available credit they have (especially at promotional interest rates) the more unnecessary money they spend. I myself am guilty of this. "Oh look, 0% for 18 months!" Next thing I know I'm online booking a vacation. Been there. Done that. Hopefully never again. I'm still paying for it. Thank goodness Slate had 0% for 15 months on BT and purchases and no transfer fee. I'm still paying for that mistake. The card has a $15,000 limit, but I was smart. I transferred the balances on my soon to be expiring 0% cards to the Slate and gave the card to my parents to hold onto. No, I did not write down the account number. I'd have been tempted to online shop.


I almost always pay in full. Once in a while something will come up where I carry a balance but I try to knock it out as quickly as possible. I'm not the guy (any longer) who carry a balance year round.

One thing that I heard long ago, which I actually think is true, is that people get used to a certain percentage of debt and then they just perpetually carry it.

So, if you have, say 50% utilization as your normal balance and you get another card for $10K, you'll likely rack up that card to 50% utilization fairly quickly (a few months) and the perpetually carry that new debt.

If, however, you pay in full each month, you'll likely knock any balance that you end up carrying out in a few months because it'll bug you that you're not at $0.

For me, this really isn't a self-imposed discipline situation as if to say that if I had $25K I'd go nuts but at $10K I'm OK. For me it's just the notion of: I don't want to every owe a credit card company the amount of a new car (albeit a fairly small car). I really should never be in that situation and, if I am, I've done something horribly wrong.

Cre
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Postby Cre » Thu Dec 25, 2014 11:22 am

I'm firmly in the CLI camp. I want as much and as many CLI's as possible. Not because I need them, or plan on utilizing them. But just because. Call it the more is better super size me syndrome.

I've never carried a balance, so the issue of my behavior changing due to increased credit availability does not appear to be a psychological factor on my horizon. Yet. But I am paying close attention to Brad Bishop's concerns, because I haven't been there done that. Yet.

That being said, one very disturbing development in my newly minted pursuit for consumer rewards based on credit card spending... is that the effort to reach certain spending thresholds has indeed caused me to splurge a bit on items that I had sort of planned on getting anyway, but still could have gotten by without. This is exactly what MB131174 was talking about. However, this might have been more due to the last minute, end of year rush to meet the threshold, which I did. Entering into 2015, I will have an entire year to distribute and carefully allocate card spending to meet the threshold, which I expect will curtail my spending back to normal levels.

I still want all the CLI's I can get though. I cannot yet see how the increased level of trust is detrimental.

(Total tangent PS... I added a signature today, which included my future strategy, and next thing I know, the ad banner changed to present a Capital One Mastercard. Amazing who or what is reading what we type.)
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AmEx Reserve Credit: $30K limit, $450 AF
Chase Slate Visa Credit: $32K limit, No AF
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Near Term: Need a good MasterCard for places that won't accept AmEx or Visa
Long Term: Will downsize out of one or both current AmEx cards to reduce AFs

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Postby takeshi » Fri Dec 26, 2014 9:20 am

Brad Bishop wrote:I'm just wondering if I'm the only one with CLDs, not inflicted upon me, but purposely chosen because I don't want to be on the hook.

I've only reduced CL's to transfer available credit. That said, no one is ever the only. Do whatever works for you and don't assume that the popularity of a topic on a discussion forum site means that everyone does whatever the topic happens to be.

Brad Bishop wrote:I've done this on several cards over the years as I really don't ever want to owe a bank $25K in unsecured debt.

Again, you have to do what works for you but available credit and debt are two entirely different things. If you think you might run the risk of maxing out your cards then it could be sensible to reduce your limits. I keep my limits as I know I'll never even come close to maxing due to the impact of utilization.

MB131174 wrote:I think $10,000 is more than reasonable. If you find yourself in an unexpected $25,000 emergency, you have a lot more to worry about than utilization and limits.

Spend varies from person to person. I had a planned expenditure of $19,000 not too long ago. You can't just assume that reasonable for one is reasonable for all.

Brad Bishop wrote:One thing that I heard long ago, which I actually think is true, is that people get used to a certain percentage of debt and then they just perpetually carry it.

So, if you have, say 50% utilization as your normal balance and you get another card for $10K, you'll likely rack up that card to 50% utilization fairly quickly (a few months) and the perpetually carry that new debt.

Again, people vary. I had been at over 60% utilization many years ago and faced balance chasing. I'm now typically at ~12% but that came as result of learning the impact of utilization the hard way. Again, each needs to do what works for the individual rather than relying on some "truth" that doesn't apply to all.



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