Credit limit vs Annual income

[MKKShah]

I just went through a round of Credit limit increase requests at my major cards. Also got approved for two new cards. My total available credit limit across 11 cards is now $60,000. Almost 60% of my annual income. I have read on some credit card forums where people claim to have upwards of 100% of their annual income.

I seem to have addiction to high credit limits even though I don't spend any where near the limit. Every time I log into my credit card accounts, I fantasize about having a higher credit limit. It's just a psychological thing, that adds to my sense of financial well being.

What amount are you comfortable with? Any downside you see to holding such high credit limits?

[disneysteve]

Why on earth do you need 11 credit cards?

As for combined credit limit, on the 4 cards we use regularly, we have:

Marriott Visa $32,500
Chase Visa $27,500
My Discover $12,000
Her Discover $14,500
______________________
Total $86,500

The only other card I can think of is a Disney Visa but that only has a $500 limit.

[greenskeeper]

We have one discover card, credit limit of $8000 if I recall. monthly charges (paid in full each month) are well below $1k.

Our visa card is a debit card only.

I can't imagine needing more "credit" than that.

Our combined income is between $60-70k

[kork13]

I don't really see the point of having an exorbitant credit limit, let alone having so many credit cards... I've got 4 credit cards -- Discover: $4k, USAA: $9k, PenFed: $10k, Capital One: $10k (total limit: $33,000, about 35% of my income). Only reason I have 4 is for their different rewards programs, and even at that, only CapOne and PenFed are used regularly. Discover use is infrequent (based on their quarterly bonuses), and USAA is almost never used (flat 1% reward is rarely my best option).

4 cards, $33k limit... IMO, that's plenty, if not already excessive. I'm never going to use close to that in a given month, so why care? I think the highest my credit card charges have ever been was about $5000, when I purchased a bunch of furniture right after I graduated college.

The only thing I do try to do with my credit limits is that I aim for a $9k-10k limit... That way, I have a limit high enough that in one of those rare "big spending" months (when I charge upwards of $3k), I still have at least 3x that amount of a limit, to prevent showing a huge debt ratio on my credit records.

[jpg7n16]

I honestly have no clue what my credit limits are. I have 3 cards, and I pay them off weekly/every other week. So the credit limit is irrelevant to me.


Your post leaves me with questions though:
Since the CC companies can reduce your limit if your financial situation goes south, what benefit is there to a high limit you don't use?
When you fantasize about higher limits, how much is enough?
What are you posting about on these CC forums?
How does the ability to borrow larger sums of money at exorbitant rates add to your financial well-being?
And to echo others, why do you have 11 cards?

[kv968]

The total limit on the 3 credit cards I use is around $25k, which is well below my annual income. I guess there's another couple of thousand on other "store" cards that I haven't used since I got them. Regardless it's way more than I need but good to have so I don't reach a high credit utilization ratio in months when I really use the cards (paying them off when due of course).

Needing or wanting 100%+ of your annual income doesn't make sense. I mean I guess having a limit like that is nice to look at as long as you're not tempted to use it but there should be no reason it's necessary.

One thing you might want to keep in mind when doing your "round of credit limit increases" is that banks may be doing a hard pull on your credit when you do your request and you could be temporarily dinging your credit score in doing so.

[BudgetSurgeon]

I just went through a round of Credit limit increase requests at my major cards. Also got approved for two new cards. My total available credit limit across 11 cards is now $60,000. Almost 60% of my annual income. I have read on some credit card forums where people claim to have upwards of 100% of their annual income.

I seem to have addiction to high credit limits even though I don't spend any where near the limit. Every time I log into my credit card accounts, I fantasize about having a higher credit limit. It's just a psychological thing, that adds to my sense of financial well being.

What amount are you comfortable with? Any downside you see to holding such high credit limits?

Here is my 2 cents comment and listen carefully: Stay far, far away from Credit Card debt. Credit Cards are poison in my eyes to many, as they feel it provides them with an endless cash flow. ONLY use credit cards as short-term 30-day bill-paying vehicles, with the intent of paying the full amount off when the bill comes due. RULE: If you don't have the cash to pay for an item, then don't buy it!

If you currently have CC debt, come up with a plan to pay the FULL AMOUNT off as quickly as possible, or you will be stuck in the CC trap forever. Once you have accomplished this, cut up your cards, and never use them again, unless you can guarantee yourself that you will only use them as 30-day short term bill paying instruments.

Sorry if this doesn't answer your question at all, but when I saw the word "addiction" in your original post, I felt
the need to write this.

[NuggetBrain]

Here is my 2 cents comment and listen carefully: Stay far, far away from Credit Card debt. Credit Cards are poison in my eyes to many, as they feel it provides them with an endless cash flow. ONLY use credit cards as short-term 30-day bill-paying vehicles, with the intent of paying the full amount off when the bill comes due. RULE: If you don't have the cash to pay for an item, then don't buy it!

If you currently have CC debt, come up with a plan to pay the FULL AMOUNT off as quickly as possible, or you will be stuck in the CC trap forever. Once you have accomplished this, cut up your cards, and never use them again, unless you can guarantee yourself that you will only use them as 30-day short term bill paying instruments.

Sorry if this doesn't answer your question at all, but when I saw the word "addiction" in your original post, I felt
the need to write this.

I really don't see how this is helpful when the OP said they don't spend anywhere near the limit.

[disneysteve]

Douglas, what you posted is true, but not relevant to the topic at hand. OP didn't say he was in debt. He asked about his credit limits. As I posted, our limits are about $87,000. Our outstanding balance? Zero. We pay our cards in full every month. Our credit scores? In the 800s.

Having credit cards and having a high limit have nothing at all to do with being in credit card debt.

[BudgetSurgeon]

OK guys, fair enough. I read through the entire post again, and there was no mention of being in debt. I think I may have interpreted his "addiction" statement the wrong way. I am so very, very against Credit Cards debt, that I saw this as an opportunity to espouse my beliefs. Apologies for straying off-topic; that was not my intent.

[MonkeyMama]

Bigger credit limits to me just mean more open to theft. Beyond a $10,000 or so credit limit to have a decent credit utilization and a good score (using credit cards to just pay bills and utilize rewards - paid off monthly), I could care less. OF course, I don't keep my unused cards open because I am more worried about credit card companies changing their terms, and cards being subject to theft. I don't want to monitor every credit card I ever owned. I believe I have about $20k limit on my current 2 credit cards, but don't really know. I have had far more than my income in credit limits at some point in time. Our credit limit is usually between $10k and $20k, per card, and I have had several cards in the past.

Of course, I have no use for credit cards, beyond rewards and using them as a secure way to pay my bills. If I needed to borrow money, the credit card would be the last place I would turn to borrowing. So I suppose why I really don't care what my credit limit is.

[MKKShah]

Just to clarify some of the concerns raised:

- I first applied to a lot of cards in college. I was approved for almost all of them for low limits ($800-1000). Then I graduated, got a job, and never thought about credit cards or their limits. But as I was ready to book a Vacation, I had to use multiple credit cards to book flights, hotel, and rental car. That is when a friend told me that he had $10,000 in credit limit, and I was shocked that people had such high limits. I called the card companies, and lo behold, I was approved for $5000 or close to it on some (I just did not bother to call all)

- This is the time I started reading forums talking about credit card limit increases, and I was hooked. I recently requested another line of increase, and have the following limits:

- Amex: $20,000
- BoA: $10,000
- Discover (split between 2 cards): $12,000
- Chase (split between 3 cards): $8,000
- Capital One (2 cards): $5,000
- HSBC: $1500
- Best buy: $3,000
- Kohls: $1000

Based on what I read on these forums, it looks like my limits could increase by another 100%.

*Jpg7n16*

Your post leaves me with questions though:

Since the CC companies can reduce your limit if your financial situation goes south, what benefit is there to a high limit you don't use?

Again, no particular reason. The fact that I had such low limits for long time, and that I can get large sums in credit makes me feel good. You could call it the "feel good" factor. The fact that I don't spend much, even though I have a large credit limit makes me feel even better. Weird, but true.

When you fantasize about higher limits, how much is enough?

As much as possible!

What are you posting about on these CC forums?

I don't post there (at least not yet!). But if you do a google search for "Credit limit vs your annual income", you will see what I am talking about.

How does the ability to borrow larger sums of money at exorbitant rates add to your financial well-being?

It's just the credit limit that makes me feel good. I definitely don't have any intention of spending anywhere close to the limit. I am in general a "saver".

And to echo others, why do you have 11 cards?

Again, this is based on legacy. I signed up for most of my cards on campus (primarily for the free t-shirts). I then requested CLI's on them, and then some banks closed down, with the cards being transferred to different banks as they bought and sold each other.

Also applied for a couple of store cards for great discounts.

BudgetSurgeon OK guys, fair enough. I read through the entire post again, and there was no mention of being in debt. I think I may have interpreted his "addiction" statement the wrong way. I am so very, very against Credit Cards debt, that I saw this as an opportunity to espouse my beliefs. Apologies for straying off-topic; that was not my intent.

Thanks BudgetSurgeon. I don't have a debt problem. I have a "fantasizing about high credit limit" problem.

[disneysteve]

I signed up for most of my cards on campus (primarily for the free t-shirts).

I grew up at a different time in the credit card world. In college, my friends and I used to fill out all the CC applications to get the free gifts too, but the reason we did it was that we knew there was no way in hell we'd get approved since we had no job, no income and no money.

You obviously came along later when all that stuff didn't matter and they would give cards to anyone with a pulse. Now you have a stack of cards that you really don't need and probably don't use. My suggestion would be to close all but a couple of them that you do use regularly and offer good rewards. Get rid of the store cards first and then trim down from there. Leave yourself 2 or 3 cards. One Chase, one Discover and the Amex would be a nice mix to maximize rewards and benefits I would think.

Yes, your credit score will get dinged a little from closing cards but that is only temporary. After 6 months or so, you can probably go to the cards you keep and request increases if you still want to. Since you won't have as many open accounts anymore, you'll likely qualify for higher limits on the cards you do have.

[jpg7n16]

OK guys, fair enough. I read through the entire post again, and there was no mention of being in debt. I think I may have interpreted his "addiction" statement the wrong way. I am so very, very against Credit Cards debt, that I saw this as an opportunity to espouse my beliefs. Apologies for straying off-topic; that was not my intent.

It's really okay I get off topic all the time! (like right now lol)

When you try and help, sometimes your mind will wander off in a different direction, or down a different path than others would take. Or you'll want to think through something someone said in a post, which leads you off track. But oh well I've learned a lot from these forums, and not all of it has been directly related to the title of the thread.

As much as possible!

Well, there's always the Amex Centurion card with no credit limit. Only $2500/year

You've arrived! True tales of the American Express Black Card

Without that one, you'll just never have enough. Even if they doubled your limits, it still wouldn't be enough.

Cause technically, if you ask for increases, and they say "no" - then you have as much as is currently possible.

It's just the credit limit that makes me feel good. I definitely don't have any intention of spending anywhere close to the limit. I am in general a "saver".

I think that when the credit limits are higher, it makes you apt to spend more.

For example, if you have a $5,000 credit limit, spending $2500 is kind of a big deal. Makes you want to pay it off ASAP.

But if you have a $100,000 limit, $2,500 doesn't seem so bad. No big rush.

Also applied for a couple of store cards for great discounts.

I can certainly understand this one If you're going to buy something anyways, why not get 10% off for signing up for a card? This makes sense to me.

I've never done it, but I can at least understand this one

Which reminds me, I need to go back and get a Target card. I tried to apply for one once, but their computer system wasn't working, so I left and forgot about it. I don't shop there much.

[MKKShah]

That's right disneySteve, I was in college when "stated income" was all the rage. I had an income of $650 pm when I applied for the CCs. In most of these cases the reps were only concerned about me filling out my SSN, address, and name. They said they would "take care" of the rest. I got a total of about 30 t-shirts, some that I use even today after 10 years. In fact I am wearing one right now as I type.

What is the reason you are asking me to close the CC acounts?

I will definitely retain the Discover, Amex, and Chase. I really don't care about the others. I think the store cards have some value due to the discounts.

I am also thinking of doing a balance transfer to each of these cards (no fee balance transfer for regular APR), and keep them 'active'. Of course, I will be paying them off immediately as well. Maybe let them earn interest for a day or so. The goal is to eventually reach $100,000+ in credit limits by being a responsible user of credit.

During the last "app o rama" my score got dinged by 20 points, but came back up in close to a year's time. This time, my credit score, is so high already, that even a 40 point drop will still keep in the very good category. And when my score comes back up, I will be requesting again. BoA has already indicated to me that they will be looking at upto $25,000 if I actually use their card, and that they will be able to do this over a 12 month period (i.e $10k next time, and $5k afterwards). The manager, also mentioned that given the number of open credit lines (and the total available limit, which surprisingly he had access to for all my cards), that he will not be able to approve for more unless I demonstrate "need".

There's one more aspect to all this, and budgetsurgeon's post reminded me of this. When in college, I partied hard, and racked up about $10,000 in CC debt, which, just a semester prior to graduation I defaulted on. I was overwhelmed by this debt, and did not know what to do. That was when I found from the "Suze orman show" that you could actually stop CC repayment and that they generally don't do anything. This was the advice she gave to someone on the show in a situation similar to mine. I did that. The result was a credit score that plummeted to low 600s, even 580 at one point. All accounts in default went to collections. I called the banks when I got a job for repayment, and quickly learnt that repaying will not result in restoring credit history. The bad stuff was there to stay. So after some research, I let things as they were. It took 7 years, about 3 years back for my credit score to get back above 700. I reopened the very same cards/accounts, and ironically I have accounts that are 10 years old, although the accounts were closed for 3-4 years in between. This boosted my credit score to close to 800. Amex now treats me with respect (as if the default did not happen).

So as you can see, I was starved of credit some time. But now, given that I am fairly responsible financially, I like the idea of having lot's of credit, and not using them. It makes me feel good.