Credit Card Limits

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JamesMS
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Credit Card Limits

Postby JamesMS » Tue Apr 14, 2015 12:53 pm

So I had a friend ask me a pretty good question. "What is a good amount of credit card limits to have". This is a good question, especially for those that are trying to keep their utilization percentage down or building their credit.

Here's what I told him, based on my train of thought.

A minimum of 10x what your average monthly charges are. Example: if you average charging $5k per month on your cards, then you should go for at least $50k in credit limits. This way on an average month, your utilization is no more than 10%.

What are your thoughts on this? I would love to hear what other people's mentality is on this.
Main Cards:
Amex BCE
Amex Everyday
Bank of America Cash Rewards
Chase Freedom
Capital One Quicksilver
Citi Thank You Preferred

Spark Cash Back (Business), Amex Plum (Business)


takeshi
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Postby takeshi » Thu Apr 16, 2015 10:13 am

It's up to the individual to determine based on situation/needs/wants/etc. While at least 10x spend means that one doesn't have to pay down balances to optimize utilization not every can get such limits.

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CarefulBuilder14
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Postby CarefulBuilder14 » Thu Apr 16, 2015 10:47 am

I pay my cards off every 7-10 days or so, mostly because I want to review all my activity. The only card on which I have utilization concerns is my Freedom ($2k CL). I've thought about moving some of the CL (maybe $2k) over from CSP ($7.5k), and I may do so if I don't get an auto-CLI on Freedom in the next month or two.

I'm not sure how rational/accurate it is, but my reasoning is that Chase (known for usually only giving auto-CLIs on healthy accounts after a year or two, if then) might be more likely to auto-CLI me while the Freedom limit is still one of my lower ones. A $2k Freedom may get a CLI more easily than a $4k one.

Freedom started 11/13 (my first card) with $600. In June or July I did get the CL up to $2k by a HP. I think they were just matching Discover's CL, my only other card with a fixed CL at the time.

Maybe I should just move it now, since $5.5k would be enough for me on the CSP. I'm not sure if that would be considered AA and make other issuers concerned, since the CSP limit would be falling from $7.5k to $5.5k.

The only reason I favor using my Freedom over my CSP for off-category stuff is that I still am earning the 10% point bonus. Once that does away, the CSP may replace Freedom for everyday things.

I think that if I were to try to get total limits that were 10x my monthly spending, I'd have to resort to opening a lot of cards that would only serve as "utilization buffers" and be an inconvenience. If I have 40% utilization report on my Freedom ($800 of $2000), and 8% overall utilization ($2k of about $25k), I'm not sure how much it would help to get my total CLs up to have lower overall utilization. The focus should be on getting the Freedom's utilization lower. So far, I've been doing that by paying Freedom off frequently.
Wallet: Prestige CSP SchwabPlat Freedom It Hyatt SallieMae AAPlat
SD: Arrival BrooksBros BCE ED IHG
Letting new accounts cool off since May
Really not sure what I'll add next or when

JamesMS
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Postby JamesMS » Thu Apr 16, 2015 11:46 am

takeshi wrote:It's up to the individual to determine based on situation/needs/wants/etc. While at least 10x spend means that one doesn't have to pay down balances to optimize utilization not every can get such limits.


I was not meaning that each card should have a 10x limit. My reasoning behind that statement was not completely typed out, so here is what I was trying to say.

Most people want to show a very low utilization and if you do not pay off the card before it reports to the credit bureau then whatever balance shows will go against your utilization. Example: Person A has a $10,000 total limit. Monthly charges = $1,000 = 10% utilization. The balance might be paid in full by the due date but not before the balance is reported to the credit bureaus. So to make sure that the total utilization percentage that is reported at any given time is 10% or less, one should (in my case and my opinion to show a low %) have enough credit that 10x average spending is there.

I think that is correct, sometimes my train of though is a little out there.
Main Cards:
Amex BCE
Amex Everyday
Bank of America Cash Rewards
Chase Freedom
Capital One Quicksilver
Citi Thank You Preferred

Spark Cash Back (Business), Amex Plum (Business)

Berk
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Postby Berk » Thu Apr 16, 2015 11:49 am

Credit limits on any one card varies from issuer to issuer. Also, you must have the income and score to obtain higher limits on any one card. Patience is a huge virtue when it comes to credit card use and credit building. If you want to keep your utilization low when you have low limits, then don't use your cards a whole lot. My utilization is 2-4% in any given month so, yes, I do agree with you that keeping utilization at 10% or below is ideal.

I will say this - if you are watching your utilization because you need to raise your score then you probably shouldn't be spending a whole lot of money to begin with. If you are watching your utilization merely because you want to get into the "800 club" then who cares what your utilization is? I
Fico Scores 05/25/2015
Equifax 766
TransUnion 788
Experian 797

Over $140,000 in credit across 12 cards.

JamesMS
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Postby JamesMS » Thu Apr 16, 2015 11:49 am

CarefulBuilder14 wrote:Maybe I should just move it now, since $5.5k would be enough for me on the CSP. I'm not sure if that would be considered AA and make other issuers concerned, since the CSP limit would be falling from $7.5k to $5.5k.

I think that if I were to try to get total limits that were 10x my monthly spending, I'd have to resort to opening a lot of cards that would only serve as "utilization buffers" and be an inconvenience. If I have 40% utilization report on my Freedom ($800 of $2000), and 8% overall utilization ($2k of about $25k), I'm not sure how much it would help to get my total CLs up to have lower overall utilization. The focus should be on getting the Freedom's utilization lower. So far, I've been doing that by paying Freedom off frequently.


Please see my second post to see what I was trying to say better. I did not mean that the limit should be 10x spending on each card, just overall so that the total utilization was 10% if balances were not paid before reporting to credit bureaus.

This is just how I try and keep it. I pay my balances in full each month but not always before the balance is reported to the bureaus.
Main Cards:
Amex BCE
Amex Everyday
Bank of America Cash Rewards
Chase Freedom
Capital One Quicksilver
Citi Thank You Preferred

Spark Cash Back (Business), Amex Plum (Business)

JamesMS
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Postby JamesMS » Thu Apr 16, 2015 11:51 am

Berk wrote:Credit limits on any one card varies from issuer to issuer. Also, you must have the income and score to obtain higher limits on any one card. Patience is a huge virtue when it comes to credit card use and credit building. If you want to keep your utilization low when you have low limits, then don't use your cards a whole lot. My utilization is 2-4% in any given month so, yes, I do agree with you that keeping utilization at 10% or below is ideal.

I will say this - if you are watching your utilization because you need to raise your score then you probably shouldn't be spending a whole lot of money to begin with. If you are watching your utilization merely because you want to get into the "800 club" then who cares what your utilization is? I


I agree with the last statement that you made. I was not saying this because I am trying to raise my score, my score is just fine. I stated this because a friend that is trying to rebuild his credit asked me what I thought.
Main Cards:
Amex BCE
Amex Everyday
Bank of America Cash Rewards
Chase Freedom
Capital One Quicksilver
Citi Thank You Preferred

Spark Cash Back (Business), Amex Plum (Business)

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CarefulBuilder14
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Postby CarefulBuilder14 » Thu Apr 16, 2015 11:54 am

JamesMS wrote:Please see my second post to see what I was trying to say better. I did not mean that the limit should be 10x spending on each card, just overall so that the total utilization was 10% if balances were not paid before reporting to credit bureaus.

This is just how I try and keep it. I pay my balances in full each month but not always before the balance is reported to the bureaus.


It's not just overall utilization that matters. High utilization on a particular card can also hurt someone's FICOs, even if overall utilization is low. That's why I was saying it would be bad to have high utilization on my high-spend, low-CL Freedom.
Wallet: Prestige CSP SchwabPlat Freedom It Hyatt SallieMae AAPlat
SD: Arrival BrooksBros BCE ED IHG
Letting new accounts cool off since May
Really not sure what I'll add next or when

JamesMS
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Location: Fort Worth, TX

Postby JamesMS » Thu Apr 16, 2015 11:55 am

I do agree with you there.
Main Cards:
Amex BCE
Amex Everyday
Bank of America Cash Rewards
Chase Freedom
Capital One Quicksilver
Citi Thank You Preferred

Spark Cash Back (Business), Amex Plum (Business)



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