If you have credit cards, what's a reasonable limit to have in them?

[Prairie~Phlox]

We have 1 major card & a few store cards, I read if you have a lower limit, your Fico score is lower. Our limit is 4k and I am thinking about lowering it, I don't know why we have it set so high. But then I read this article: https://www.creditkarma.com/article/relationship_score_and_credit_limitsalso, I know we want to travel in the future, so maybe I should keep it where it is at. So do you have a larger limit? Ir is it best to go lower?

[marbel]

I'm confused here.  A higher FICO score is good, right?  So if a lower credit card limit = lower score, why would you want to have the credit card company lower your limit?    

 

 

 

 

[displace]

I think if you check your fico score you can see where you are at, then decide to make changes as needed. All the things on those reports vary in significance. Most important is your (general your) debt and delinquency/bankruptcy. If you have zero balance vs $4,000 balance that's taken into consideration and if you're late paying vs on time. There's a bunch that's considered.

Edited February 24, 2016 by displace

[creekland]

I don't worry about the limits TBH.  What matters is what we can pay.   :coolgleamA:

 

We have 5 general credit cards total (between hubby and I) and 3 of those 5 have limits in the 5 digit range.  I could buy a new car on credit card if I wanted to.  Not sure why I'd want to, but that's a different issue.

 

A high limit came in handy when we needed a quick emergency fund.

 

I make sure ours have no annual fees and rather low interest rates just in case we have a balance on them.

 

Store cards have lower limits, but that's ok too as we never spend that much at stores.

 

Credit companies take the hit if someone were to steal our card and use them, so I'm not worried about high limits.

[Lolly]

My response is similar to Creekland's. I don't really about limits too much. Mine are...very high... Btw, you are not allowed to buy a new car with a credit card. I tried. The car companies will only allow a certain amount to be charged on a credit card (and it is pretty low!). I was going for cash back $...as well as not having to make a trip to the bank. I want to be able to use my credit card to make any purchases that might come up, say for remodeling a kitchen or surgery or purchasing a plane ticket home from Asia. I put every single purchase I can on my credit cards. Well, unless the store is willing to give me a cash discount higher than my cash back reward!.

[Night Elf]

I've heard it's the ratio between my credit altogether and what I owe. I have a couple of Visa credit cards and a couple of store cards. We have high credit limits on them all but carry a very low balance across the board. I don't see a down side to having a high credit limit, unless I'm missing something.

[SparklyUnicorn]

My response is similar to Creekland's. I don't really about limits too much. Mine are...very high... Btw, you are not allowed to buy a new car with a credit card. I tried. The car companies will only allow a certain amount to be charged on a credit card (and it is pretty low!). I was going for cash back $...as well as not having to make a trip to the bank. I want to be able to use my credit card to make any purchases that might come up, say for remodeling a kitchen or surgery or purchasing a plane ticket home from Asia. I put every single purchase I can on my credit cards. Well, unless the store is willing to give me a cash discount higher than my cash back reward!.

 

Although really a car loan usually has way better terms even if your credit is lousy!

[catz]

We have very high limits. We could certainly buy a car (though we wouldn't). That said we pay it off in full each and every month. That's the trick.

[Pawz4me]

We also have very high limits.  I have two cards and DH has one.  We could buy a new car with each of them.

 

One important factor for credit scores is your debt to available credit ratio.  The lower the ratio the better.  So if you have a $4,000 limit and a $1,000 balance that looks worse than if you have a $20,000 limit and a $1,000 balance.  With a higher limit you're utilizing a much lower percentage of your available credit.

Edited February 24, 2016 by Pawz4me

[Pawz4me]

Although really a car loan usually has way better terms even if your credit is lousy!

 

But if you have a cash back rewards card, bought a car with it and paid it off immediately you could save a significant amount.  If I paid for a $25,000 car with my credit card I'd get $500 back.

[gardenmom5]

how good are you at NOT using the credit cards you have?  how good are you at paying them off every month?  how good are you at not carrying a balance, or maxing them out?  

 

we have high limits - but we also pay off our cards every month. (and don't go near the max.)

Edited February 24, 2016 by gardenmom5

[gardenmom5]

But if you have a cash back rewards card, bought a car with it and paid it off immediately you could save a significant amount.  If I paid for a $25,000 car with my credit card I'd get $500 back.

 

assuming you're buying your car from a dealer.

my costco amex with it's 2% back, pays for itself . .  ( yesterday, I heard a clerk say the transition to visa has been pushed back several moths. :toetap05: )

 

just having the 'recipet' on the card is nice when I need to make returns.  I just swipe the card.  home depot, target, fred meyer - and that's my main cc.  I rarely use an individual store card.   

[Prairie~Phlox]

Ok, I will leave it where it's at, we don't like to have debt and though have had a balance on it before, it is now at $0 balance and will be paid off monthly, as we do have our cell phone & cable bill paid on it and do use it for some other purchases. (Dh took a job last summer that put us in a much better financial position, so there will be no reason to carry a balance.

[creekland]

My response is similar to Creekland's. I don't really about limits too much. Mine are...very high... Btw, you are not allowed to buy a new car with a credit card. I tried. The car companies will only allow a certain amount to be charged on a credit card (and it is pretty low!). I was going for cash back $...as well as not having to make a trip to the bank. I want to be able to use my credit card to make any purchases that might come up, say for remodeling a kitchen or surgery or purchasing a plane ticket home from Asia. I put every single purchase I can on my credit cards. Well, unless the store is willing to give me a cash discount higher than my cash back reward!.

 

I haven't actually tried to buy a car with ours, but I suspect if companies don't allow it, it's because they have to pay the credit card fee for merchants and they don't want to lower their profit by that much.

 

We put almost everything on our credit cards to get benefits from them - usually free Amazon stuff.  It's nice ordering birthday/Christmas presents or books for college and not having to pay (or pay much) for them - legally!

[creekland]

Ok, I will leave it where it's at, we don't like to have debt and though have had a balance on it before, it is now at $0 balance and will be paid off monthly, as we do have our cell phone & cable bill paid on it and do use it for some other purchases. (Dh took a job last summer that put us in a much better financial position, so there will be no reason to carry a balance.

 

Do you have a card that gives you rewards?  It very seriously is worth it. Change your card if yours doesn't.  See my post above about getting oodles of free things from ours - no interest or annual fees required.

[regentrude]

You want a high limit. What affects the credit score is the degree to which you get close to the limit - it is better to have a high limit and use a small portion of it than to have a low limit and max it out.

You want the high limit for safety margin.

Get as high a limit as the bank will give you - you don't have to use it.

Edited February 24, 2016 by regentrude

[need2read]

The FICO score looks at how maxed out your credit is. If you have a $4000 limit and your revolving balances are always within a couple hundred of that limit it will lower your score; if you have a limit of only $2000 but your revolving balance stays below $1000 most of the time your score will be higher.

 

You should be using half or less of your available credit at any time for a high score. So if you routinely charge $2000 a month then you should keep your limit where it is.

 

We have been turned down for loans in the past and one of the reasons given was "ratio of balances to available credit too high."

 

 

Sent from my iPhone using Tapatalk

[JFSinIL]

We have one card, limit is about $20,000.  We charge about $2,500 a month..(groceries, gas - regular stuff we'd be buying anyway*) and pay in full on time each month (why pay interest?).  Keep as high a limit as possible, BUT don't use it.  Don't put more on the card than you can pay off in full each month.  Simple as that.

 

* Our card is from Chase, we have the Amazon version, and collect points.  Average about $600 a year in free stuff from Amazon with our points (I usually hoard points to use at Christmas time for the bulk of my holiday shopping).   My advice is pick ONE card with no annual fee that has a rewards system you will use. 

 

 Oh, and we found, too, that you can't put more than about $3,000 of a car on a credit card, drat.  You can put college tuition on a card...but colleges charge a fee (or pass on the fee) for doing so.

 

I pay all our medical bill with our Visa  (as long as I have money in the bank to pay off the card each month).

Edited February 24, 2016 by JFSinIL

[SparklyUnicorn]

But if you have a cash back rewards card, bought a car with it and paid it off immediately you could save a significant amount.  If I paid for a $25,000 car with my credit card I'd get $500 back.

 

Ah ok.  I don't have that kind of money so that was a scenario I couldn't fathom.

[gardenmom5]

I haven't actually tried to buy a car with ours, but I suspect if companies don't allow it, it's because they have to pay the credit card fee for merchants and they don't want to lower their profit by that much.

 

We put almost everything on our credit cards to get benefits from them - usually free Amazon stuff.  It's nice ordering birthday/Christmas presents or books for college and not having to pay (or pay much) for them - legally!

 

which is why dealers *really* want people to finance through them.  it's a big money maker for them.  we never, ever, ever, finance a car through a dealer.  it can also tick them off. 

[creekland]

which is why dealers *really* want people to finance through them.  it's a big money maker for them.  we never, ever, ever, finance a car through a dealer.  it can also tick them off. 

 

We financed our newest car through the dealer.  The interest rate is 1.9% I think.  It's lower than we can get by investing the same $$ elsewhere, so financing it is a win for us.  Our credit union offered us a similar rate, but just going with the dealer was easier as we didn't need anyone to cut a check.

 

Had we opted for a new car, the interest rate would have been 0, but the cost difference in buying a car two years old more than makes up for the interest.

 

Car buying guides online confirmed the price we paid was a decent one.

 

We don't mind leveraging debt to earn more money.  Some folks are opposed to that.  To each our own.

[Shellydon]

We have a couple of high limit cards. One earns Southwest Airline points.  We earn enough for 6 plane tickets each year.  It is great.   I

[TechWife]

My response is similar to Creekland's. I don't really about limits too much. Mine are...very high... Btw, you are not allowed to buy a new car with a credit card. I tried. The car companies will only allow a certain amount to be charged on a credit card (and it is pretty low!). I was going for cash back $...as well as not having to make a trip to the bank. I want to be able to use my credit card to make any purchases that might come up, say for remodeling a kitchen or surgery or purchasing a plane ticket home from Asia. I put every single purchase I can on my credit cards. Well, unless the store is willing to give me a cash discount higher than my cash back reward!.

 

We wanted to put a new car purchase on a credit card so we could earn frequent flier miles. The dealership would only put $500 on the card. Bummer. 

[TechWife]

 

 

 Oh, and we found, too, that you can't put more than about $3,000 of a car on a credit card, drat.  You can put college tuition on a card...but colleges charge a fee (or pass on the fee) for doing so.

 

 

My son's university does not charge a fee for this. It saves them money because they don't have to spend as much time processing check payments. 

[SKL]

I don't know what my limits are, but I'm pretty sure they are higher than $4,000.

 

The only reason I could see for wanting a low limit would be if one of the users has a self-control problem with spending.

 

I keep my balances at $0, but I like the idea of having access to a lot in case of emergency.  The most I've ever had on my card was when I bought my parents' new furnace for them.  I have also used my card to pay my sister's emergency vet bills.

[shawthorne44]

It will definitely lower your credit score.   It also might change the companies attitude toward you.  Because they can't comprehend anyone voluntarily lowering their own limit, when they see that your score was lowered the workers will think you are a dead-beat and treat you accordingly.   When I was in grad school my research project was funded off a big government project and I had a stipend.  Big government project was cancelled and I was basically out on my ...   I'd been doing OK for a grad student, but no cushion.   I'd had a Optima card with a high limit and I could see that would be tempting.  So I asked them to lower my limit to $500.   It was the responsible thing to do.   I became DeadBeat#1 with everyone I talked to after that.  

Edited February 24, 2016 by shawthorne44

[gardenmom5]

I don't know what my limits are, but I'm pretty sure they are higher than $4,000.

 

The only reason I could see for wanting a low limit would be if one of the users has a self-control problem with spending.

 

I keep my balances at $0, but I like the idea of having access to a lot in case of emergency.  The most I've ever had on my card was when I bought my parents' new furnace for them.  I have also used my card to pay my sister's emergency vet bills.

 

when the girls went off to college on the other side of the country - we got them their own cards. we made sure they had high enough limits they could buy airline tickets home in an emergency if needed.  or any other unexpected expense.  

[SparklyUnicorn]

We financed our newest car through the dealer.  The interest rate is 1.9% I think.  It's lower than we can get by investing the same $$ elsewhere, so financing it is a win for us.  Our credit union offered us a similar rate, but just going with the dealer was easier as we didn't need anyone to cut a check.

 

Had we opted for a new car, the interest rate would have been 0, but the cost difference in buying a car two years old more than makes up for the interest.

 

Car buying guides online confirmed the price we paid was a decent one.

 

We don't mind leveraging debt to earn more money.  Some folks are opposed to that.  To each our own.

 

Yeah the dealer rate and the credit union rate would have been the same for us.  1.9%  We went with the credit union since we have another loan through them.  So everything gets done automatically on the same day and we get one statement. 

 

And wow talk about fantastic in my book.  The first car I bought I paid 14.99% interest.  It was a new car (I had no credit).  I opted for new because that was the percentage cap on a car loan (for new).  For used there was no cap so I could have potentially paid much more than that. 

[DawnM]

We have very high CC limits and both of our credit scores are in the 800s.  I don't worry about it.

[creekland]

but I like the idea of having access to a lot in case of emergency.  

 

Ditto.  It's also better financially since we don't have to keep that much accessible in an emergency fund when we have an extra 30 days or so at no interest.  There's time to transfer money from higher interest investments if the need comes up and we deem it worthy to do so.  There have been times we've just opted to pay the interest for a month or two though - mainly for convenience over transferring out of other accounts.  This is why I also like my cards having low interest rates.  One we have is at 7.75% regularly, but others often have "deals" even down to 0%.

 

Right now one essentially earns nothing on a savings account.  It doesn't make much sense to keep an emergency fund there (to us) - not much of one anyway.  Small emergencies.  Higher ones can go on credit card(s) if needed.

 

But again, YMMV. I know some popular money gurus make a ton of money off telling folks otherwise.  We just disagree for ourselves.  I like to squeeze the most I can out of our $$.  It helps fund my travel junkie habit!

[TranquilMind]

We have 1 major card & a few store cards, I read if you have a lower limit, your Fico score is lower. Our limit is 4k and I am thinking about lowering it, I don't know why we have it set so high. But then I read this article: https://www.creditkarma.com/article/relationship_score_and_credit_limitsalso, I know we want to travel in the future, so maybe I should keep it where it is at. So do you have a larger limit? Ir is it best to go lower?

My credit limit is very high, because I have had the same card for over 35 years with a perfect payment record.  Used to be higher but years ago, when they decided to hit everyone at once with higher rates and lower credit limits, they lowered it.  I called and complained.  The head cc dude from New York City called me back, thanked me for my 35+ years with the card, and raised the limit again and gave me my 4% interest rate back (though I don't carry a balance most of the time unless I am renovating, and then a short while). 

 

I keep it high because it keeps the FICO high. 

 

I would not go lower at all, and don't even think 4 is enough.  But then, thanks to the crap insurance today, I had to pay over 4 last week just for a surgery for a family member, so I was really glad it was easily available. 

Edited February 24, 2016 by TranquilMind

[TranquilMind]

which is why dealers *really* want people to finance through them.  it's a big money maker for them.  we never, ever, ever, finance a car through a dealer.  it can also tick them off. 

I financed through a dealer once, but only because the dealer gave up in frustration when I refused to buy the car unless they met the rate I got outside the dealership (about 3 percentage points lower, at the time!).  My (then tiny) kids and husband were exhausted and it was way past closing time and he threw us out of the dealership after grudgingly agreeing to sell the car to us.  No one shook our hands. 

We got a good deal. 

[TranquilMind]

We have one card, limit is about $20,000.  We charge about $2,500 a month..(groceries, gas - regular stuff we'd be buying anyway*) and pay in full on time each month (why pay interest?).  Keep as high a limit as possible, BUT don't use it.  Don't put more on the card than you can pay off in full each month.  Simple as that.

 

* Our card is from Chase, we have the Amazon version, and collect points.  Average about $600 a year in free stuff from Amazon with our points (I usually hoard points to use at Christmas time for the bulk of my holiday shopping).   My advice is pick ONE card with no annual fee to us that has a rewards system you will use. 

 

 Oh, and we found, too, that you can't put more than about $3,000 of a car on a credit card, drat.  You can put college tuition on a card...but colleges charge a fee (or pass on the fee) for doing so.

 

I pay all our medical bill with our Visa  (as long as I have money in the bank to pay off the card each month). 

You are the second person to say that you can't charge the car.  Why not?  If you have the limit, then why can't you?  The dealer could simply verify with the bank that you indeed have the limit. 

 

I've thought about doing this, so I wondered what would prevent it?  What justification were you given?

[SparklyUnicorn]

Although technically one could charge a car.  Maybe that wouldn't count towards points though.  We get these checks from the CC company all the time inviting us to write ourselves a check.  We used these twice and both times deposited the money into our bank account.  Nobody asked what we were doing with the money.

 

 

[SparklyUnicorn]

I financed through a dealer once, but only because the dealer gave up in frustration when I refused to buy the car unless they met the rate I got outside the dealership (about 3 percentage points lower, at the time!).  My (then tiny) kids and husband were exhausted and it was way past closing time and he threw us out of the dealership after grudgingly agreeing to sell the car to us.  No one shook our hands. 

We got a good deal. 

 

good for you!

I am so lousy at this sort of thing.  My sister is great at haggling though.  She always walks out with a deal.

[TranquilMind]

good for you!

I am so lousy at this sort of thing.  My sister is great at haggling though.  She always walks out with a deal.

You  - and my husband. He is a rather passive, nice guy who never pushes back.    I still remember him sadly turning to me and saying that they wouldn't give us below their regular, super-high rate.  He said I went into "head-bobbing mode" and got into the guy's face, justifying why we pay the rate we do.  ;)

 

The guy threw his stuff down in disgust and said - of course, standard dealer guilt fare, which doesn't work on me - "Well, I guess the salesman doesn't need to eat."  I replied that he should pay him more if he thought it was a problem, but it wasn't my problem to overpay everyone there so their profit was higher.  

Edited February 24, 2016 by TranquilMind

[TranquilMind]

Although technically one could charge a car.  Maybe that wouldn't count towards points though.  We get these checks from the CC company all the time inviting us to write ourselves a check.  We used these twice and both times deposited the money into our bank account.  Nobody asked what we were doing with the money.

But you pay an additional fee on that for "obtaining cash". 

[Eliz]

I was told once to avoid too high a credit limit if I intended to apply for a mortgage.  Apparently, some mortgage companies believe people would get the house, then begin to buy on credit making it harder to pay the mortgage payment.  This probably doesn't apply to high income applicants, though.

[SparklyUnicorn]

I was told once to avoid too high a credit limit if I intended to apply for a mortgage.  Apparently, some mortgage companies believe people would get the house, then begin to buy on credit making it harder to pay the mortgage payment.  This probably doesn't apply to high income applicants, though.

 

Yeah there is probably some truth to that.  They watch your expenditures like a hawk as you are in the process of getting a mortgage.  We needed to borrow the earnest money because we wanted to close sooner than we could get the money from an account.  They wouldn't allow us to borrow it even from a relative.  My dad had to sign something saying he was giving it as a gift (we did pay him back).  Ridiculous.  And this was a relatively small amount of money.

[SparklyUnicorn]

But you pay an additional fee on that for "obtaining cash". 

 

Yes you do.  So I can't imagine that being some sort of good deal. 

[JFSinIL]

You are the second person to say that you can't charge the car.  Why not?  If you have the limit, then why can't you?  The dealer could simply verify with the bank that you indeed have the limit. 

 

I've thought about doing this, so I wondered what would prevent it?  What justification were you given?

The merchant has to pay a fee when we use a credit card. The fee on a car is much higher than if we were just buying a sofa or cart of groceries. Cuts into the dealer profit. They make more money if you finance with them, too. Which is why we did NOT tell the salesman that we had the means to pay CASH when we bought another (gently used) car last fall. Waited until we had negotiated a price then said we had cash. We just did not ourselves say anything about interest rates on car loans as he babbled about them.

Edited February 24, 2016 by JFSinIL

[Alessandra]

Besides all the good reasons already given, holds are another reason to have a higher limit. If you are at a hotel, the hotel will often put a hold on your card equal to the smount that you might pay in incidentals. When you check out you pay for your charged, but the hold may still be on your card for a short period. People can find that they are maxed out because of holds.

[TranquilMind]

The merchant has to pay a fee when we use a credit card. The fee on a car is much higher than if we were just buying a sofa or cart of groceries. Cuts into the dealer profit. They make more money if you finance with them, too. Which is why we did NOT tell the salesman that we had the means to pay CASH when we bought another (gently used) car last fall. Waited until we had negotiated a price then said we had cash. We just did not ourselves say anything about interest rates on car loans as he babbled about them.

OK, thanks.  I might calculate how much his fee is and then offer to pay some portion, if it suited me.  It all has to be on the table though.  There is no law that you can't finance; they just prefer that you not.  I can't imagine they would refuse to sell a car to you for doing this, but possibly. 

 

I agree and good for you.  I would have liked to have seen his face when you dropped that you were paying in cash.  ;)    You never, ever reveal how you are financing until you agree on a car and on a price in writing.

 

Price

 

Trade in

 

Financing.

 

That order only.  They try to mix or reverse the order.  You can always just say you don't multitask well, so you need to keep on point and resolve one before bothering to move to the next.  It is never relevant whether you have a trade in or where you are financing until you have an agreed price. 

Edited February 24, 2016 by TranquilMind

[theelfqueen]

Although really a car loan usually has way better terms even if your credit is lousy!

 

I think the point of this was... I've got the cash to pay for the car, but if I put it on my card I get my rewards! Then I pay off the card instead of paying the car people directly. (I can see myself considering this -- I want my Disney Dollars!)

[marbel]

I wish I could pay my mortgage via credit card.  All those points every month would be so nice...

 

(And yes, I would pay it off monthly.)

[shawthorne44]

I think the point of this was... I've got the cash to pay for the car, but if I put it on my card I get my rewards! Then I pay off the card instead of paying the car people directly. (I can see myself considering this -- I want my Disney Dollars!)

 

I knew someone that basically bought their house with their Amex card.  The house was being built for them and they had a home loan prearranged.  The bank won't pay for stuff until it is already done, so they don't end up giving out 50% of the money on a 10% built house.   The builder has lots of stuff to buy and people to pay beforehand. 

 

They trusted the builder so they gave him their Amex card to buy materials.   This automatically added a one month delay on when they had to pay.  Everyone was happy.   The builder didn't have to up-front any money for materials, so building proceeded quickly.   With the one month delay on materials payments, and the deposit being used first, the house was always enough percentage done that the bank was happy to pay as needed.  

 

When it was done the home loan was a lot less than they'd calculated.   When you get 5-digit Amex bills, you just naturally limit your eating out and extraneous shopping.  They also had a boat-load of points. 

 

[Lolly]

Although really a car loan usually has way better terms even if your credit is lousy!

 

Nope. Pay off the credit card when it is due. Pure profit on the rewards.

 

But if you have a cash back rewards card, bought a car with it and paid it off immediately you could save a significant amount.  If I paid for a $25,000 car with my credit card I'd get $500 back.

 

Exactly!

You are the second person to say that you can't charge the car.  Why not?  If you have the limit, then why can't you?  The dealer could simply verify with the bank that you indeed have the limit. 

 

I've thought about doing this, so I wondered what would prevent it?  What justification were you given?

 

Dealership policy. It costs them too much in fees. It isn't illegal, dealerships set their own rules about it.

[Guest]

We have high limits and do carry a balance on occasion, like right now after a big trip. But our goal is to pay them off every month generally and the size of our limit doesn't impact our habits with the card.

[Prairie~Phlox]

Do you have a card that gives you rewards? It very seriously is worth it. Change your card if yours doesn't. See my post above about getting oodles of free things from ours - no interest or annual fees required.

Absolutely, that's the only reason we use it for said bills & stuff.

[Random]

There are three main factors that determine your credit score (FICO or otherwise):

 

1. Payment history

2. Ratio of debt used to debt available. Theoretically, a high limit would be helpful.

3. Age of credit.  A lot of new debt will bring down your score.

 

There are other factors, but these are the big three.

 

Incidentally,  we were able to buy a car from a dealership on a cc.  It was a $7k used car.  We did pay a fair price (really, a great price!).  We did get our points/rewards.  YMMV.