I wanted to know why Bank of America raises my credit limit–I got an $800 card a while back and it went to $1300, then $3000, then $3300 by itself, without anyone ever asking me. PenFed offered me $15000 but I declined, went for $3000 instead (I wanted to consolidate my accounts under the credit union–plus that card is 9% APR).
Curious, I asked Google about these automatic credit line increases.
What I found was a bunch of people with scores like 563 and 528 talking about their $14k, $18k, $25k credit cards–just one card with a $25,000 limit–and how they called the bank and got an increase of $5k in 10 minutes.
Wait, what?
My credit score is 783.
WHAT?
Okay folks, what’s about normal for you for a single credit card limit? Why do all these broke bastards who can’t pay their bills have cards half the size of my mortgage?
Seriously. $25,000 credit cards. Man I’m thinking on closing the BoA one, $3000 is good for me.
The bank’s job is to make as much money as possible. Their job isn’t helping people to make sound financial decisions. Banks set their credit limits and rates to maximize their profit. If they can get some sucker to put $25k on a card and charge him 15% APR, (and hope that sucker doesn’t understand why APY is different) why not?
I’m more thinking about the crazy stupid bastards that have more revolving debt than income per annum. The bank offered me $15k and I was like… uh, no?
I hate to say this (because I work for a bank) but people often mistake a credit card company for a partner and not a for profit entity. Credit card companies make their money off of people who are not smart financially but are very honest and intent on “doing what is right”.
CC companies don’t want customers who payoff their balance every month since they make no money on them. The perfect customer is the person who makes $1100/mo and has a $5000+ balance on their CC. These people will never pay off their debt but they will keep trying to because “it’s the right thing to do”.
Financially smart people know that when you get in a hole so deep you can’t get out by yourself, you look to bankruptcy to level the field. “Doing the right thing” only keeps you digging in further.
Banks like B0fA are not your partner because to them you are a profit center. It’s sad but true. Look at the business from the bank’s perspective and you will understand why they do what they do. You won’t be happy about it but at least you will understand.
Right. The banks don’t make much money off of folks who pay on time …and within the industry, people who their full balance off every month and on time are called “deadbeats”. That alone tells us where the credit card industry is coming from.
Funny, that. Credit cards as they exist in the USA do not exist in France, or most of Europe. You can get the equivalent of Macy’s cards and whatnot, for individual purchases in specific shops, but pretty much everybody uses debit cards here. It’s one way (I think) that Jacques Shmoe dodged the bullet. There are still plenty of people here who get in over their heads, but not nearly as much as in the US. Of course, the society is to some degree less consumer-driven here, which has its upsides (everything is closed on Sundays, people spend time with their in-laws and family) and its downsides (everything is closed on Sundays, people spend time with their in-laws).
Very true Phil. If you all remember back in the 70’s you had to pay a yearly fee to have a credit card and you were expected to pay it off every month. Only after people started carrying a balance and the companies started to collecting the interest did they realize the cash cow they had created.
Part of your credit score is the amount of credit utilized vs available. So if you have like a $1000 limit and use 50% of that on a monthly basis and everything else is equal you will have a lower credit score than someone with a $25000 limit and using that same $500 per month.
Another side of that little rule is that if you decide you don’t want a card anymore and cancel the account, the rating agencies will assume that you can no longer afford the card and rate you a higher risk because you decreased your available credit. So if you do the right thing for you, they will drop your credit rating. Ironically, if you decrease your risk level they assume you are now a higher risk to creditors.
That’s true. The numbers are not as big as the interest on the debt though. That’s basically what drove the regulations on debit card charges. Banks were charging per swipe fees and %-take offs on debit that were highway robbery because they don’t make any interest on the debt.
Yeah, I was thrilled when they passed those regulations. We’re charged a % for each transaction, plus flat batch fees, plus flat monthly fees. We get charged more if we swipe a card again if it’s declined, we get charged twice as much if the magnetic strip is worn out and we have to punch the numbers in. And AMEX and those rewards cards cost more to run too. Sadly, we do probably 1/3 of our business on credit cards otherwise we’d ditch the machine.
Thanks to Dodd-Frank, we’ll be paying a capped .05%+ $0.21 per debit-card swipes for Visa/MC debit cards, and most the cards we run are debit, not credit. But, since the banks can’t screw the merchants (as hard) anymore, they tried to screw consumers (if you remember last year when the big banks announced they would start charging for checking accounts with debit cards, then quickly reversed tack.)
Cash price and credit price is coming back at gas stations. Way back in the day (late 70s? early 80s?) it was common for the credit price to be slightly higher.
Joe Sr, Now you are taking me back… When I was growing up in OK our local gas stations near the interstate also gave a cash discount to locals that was not available to “outsiders”. I would be 3-4 cents a gallon when gas was less than $0.60/gal.
I remember back in the 70’s my Dad had an American Express… I was very young and impressionable. He said- “it’s the only one I have and can charge as much as I want but have to pay it off at the end of the month…” It was used sparingly and as we spent a lot of time overseas American Express Traveler’s checks were used primarily. I remember Dad having sheaths of them. Probably he used the card when renting cars. Regardless, it wasn’t until the 90’s where people seemed to have more of them. Cards were still for business or for people who could afford them as a convenience as writing checks for large purchases was commonplace.
As a result it stuck with me through my 20’s and 30’s that credit cards are extremely dangerous so took refuge in zero credit. Which incidentally, is one way to foil identity thieves as it takes a while to establish and have decently dangerous access to credit; but, is a pain in the ass when you actually want to buy anything that requires a loan or a credit check- such as a vehicle or rental property.
When I actually established credit it was with a low-limit secured credit card and built it up quickly. I paid in full each month and my limit was extended until I hit my discomfort level. I haven’t asked for an increase in 6 years- nor has an offer been extended.
All I can say in these days of easy credit it appears to me that the creditors want to hook you young and hard- deep enough to where it’ll take real effort to clear the balance. My opinion is that if an individual cannot afford to pay off the card every month then it is being utilized wrong or they can ill-afford to possess the instrument.
I like the idea of loadable cards but think the fees that are charged outweigh the benefits of actually using one. A debit card linked to a separate low-balance personal expense account to which one can transfer funds to sounds like a decent alternative. Give one to each kid and put their allowance on it twice a month. Teach them how easy it is to wipe oneself out… ;D Establish discipline! BTW what is the average “allowance” these days?
Funny thing is I’ve gone for months and months without any cash at all. Too easy to use the card. 8)
My high school age kids get $40/mo from Mom and Dad. We cover the major expenses (gas, insurance, the car and such) so the allowance is so they have spending money for a movie, snack, date or some such. I know kids who get 100-200 but they’re folks expect them to cover more of the basic expenses.
It’s the ratio between your balance and available credit it’s true but if yo pay off your balance every month it doesn’t really matter as the ratio between $0.00 owed and $1,000.00 available and $0.00 owed and $25,000.00 availabe is exactly the same. Now if you are carrying a balance on one card and cancel a different card then your score takes a hit because your ration has changed by the amount available on the closed card.
I just did this research becuase I finally got rid off all my credit card debt by borrowing money from family. (yeah family) one upside of the poor economic condition in the country right now is it actually makes good economic sense for my mother in law to take money out of her retirement investements and lend it to me at 5% interest over two years. She’s going to make more on that couple grand than she would have leaving it in mutual funds.
Glad to hear I’m not the only one doing creative banking. 8^)
Last year when we suddenly needed to replace the high school car (but not the high school kids, thankfully) we were looking at financing part of the cost. We didn’t want to impact the “have money set aside to live on if you get laid off” plan but we decided to “borrow” the money from a savings account that only makes .2%. We paid it back over 12 months at 8%. It was the best return on a cash investment I made all year.
