Credit limit vs Annual income

[MKKShah]

Ok...it's been a while since I last posted on this thread. Had a round of discussion with Credit card issuers and the verdict is in:
My credit limits now are:
- American Express - Costco - $20,000
- Bank of America - $20,000
- Discover - $15,000
- Citibank - $25,000
- Citibank - II - $10,000
- Chase - $7800 (3 cards)
- Capital One - $5000 (2 cards)
- Toys R US - $3000
- BestBuy - $3000
- Kohls - $1000
- HSBC - $1100
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Total : $110,900 (14 cards)
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Wife:
Bank of America : $5000
Citibank : $5000
Discover : $4000
Chase : $7500
USBank : $3000
Amex Blue : $4300
Capital One : $2500
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Total : $31,300 (7 cards)
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Total household credit available: $142,200. (of course current balance is 350, to be paid off at month end)

So we have balance transfer offers (@ 3% fee, for 12-15 months) for upto $120,000. Based on this information, I am planning to invest my emergency fund and bring down to 0, and rely on 0% BT as the official source of my emergency funds.

Anyone else with a similar idea? Any drawbacks of this strategy?

[feh]

Anyone else with a similar idea? Any drawbacks of this strategy?

I'm not a fan of using CCs for an EF, regardless of the interest rate.

[Wino]

I am planning to invest my emergency fund and bring down to 0, and rely on 0% BT as the official source of my emergency funds.

Anyone else with a similar idea? Any drawbacks of this strategy?

I do similar, though I keep a few thousand sitting around that will handle all typical short-term emergencies. The real drawback is if your emergency occurs during a down market. You'll be forced to "sell low" rather than "sell high." I balance this possible loss against the definite loss in purchasing power you'll get in a money market due to inflation.

So, I get 10%+ per year on average, though I could easily lose 20% (or more) if my emergency occurs in a down year, balanced against a certain loss of 2 to 3% per year that will never be recouped. I think it comes down to your views on risk and how stable your situation is. Barring injury and illness, my job is very secure, so my emergency fund is just "life insurance lite" - not dying, but being no longer able to work, as opposed to being out of work due to company or job situation.

[hamchan]

Man, do I ever get where you are coming from. My credit got destroyed by medical bills starting when I was 19. I never had a chance to get credit cards, and was never able to get credit of any kind until I filed for bankruptcy a couple of years ago. Initially I got quite a few credit cards to help rebuild my score. But now it makes me feel good to get a new credit card, or get a limit increase on an older card. Like I actually get a small high from it. Like you, I rarely carry a balance, and only if it's zero interest and I can pay it off before the interest kicks in. But I guess it just represents something I feel like I was robbed of at an early age.

[corn18]

I'm just shy of $200,000 on 16 different cards. My wife likes dept store cards like Macy's, JCP, Kohls, Target, etc... to get the discounts and extra savings for when she uses their cards. None of them carry a balance but it's a PITA on the ones that don't offer autopay. I hate that. I make them send me a paper bill so I know when my wife charges something on them.

I think the high credit limit does help my credit score. Although I'm not sure it needs to be that high to keep the percentage of balance to limit in check. Since I only charge $6k / month vs. a $200k limit.

Tom

[Wino]

W have about $15K of store cards and $45K of bank/CU cards. DW just put some new french doors on the Home Depot card (0% for a year), so we still have about $4500 in balance (from $10K initial purchase) that will be paid off around January 1. That was an intentional "credit purchase" done solely to take advantage of the 0% interest. We keep the cards only for emergency use and convenience. We use debit cards for almost all of our "cash" purchases. When I am in Indonesia (for example), they may not accept debit cards so if I'm short of cash, I'd then use a credit card as a fall-back.

I don't chase rewards, as I can make more money by concentrating on my work to increase my bonus. It's just a matter of where I want to direct my efforts for the most gain. Maybe I'll talk DW into doing the "reward chase" as a part time job. She'd probably enjoy a job where one of her main tasks would be shopping.

Edit: I don't count the Amex. It is a charge card, not a credit card. The "limit" there is at least $25K per month, as I've charged over that on occasion. They called me one time, when the card was new and I put about $15K on it. It was used for work purposes only, but essentially had no limit, so you don't need the black card. They'll not question any purchases under what you've charged previously.