Credit card limit cut in half.

[OKCHunter]

I had credit card balances once and realized how much money I was giving away. I took out a home equity line of credit at a much lower interest rate and paid off the credit cards. Then went to work paying off the line of credit. I don’t charge against credit cards unless I can pay the balance each month. Emergency or unexpected expenses are charged to a credit card but paid off from bank savings unless significant. In that case, a credit card would be used and the balance paid from the line of credit.

There are smart ways to use credit cards and reap the benefits of reward programs. The key is don’t charge more than you can afford to pay-off each month.

 

[Rez Exelon]

Wow, not a single poster admits to carrying a balance on a credit card. I guess they are great and the stories I hear of massive credit card debt are just fiction. Travel points, cash back, and other rewards must have credit card companies going out of business. MANY people have large credit card debt, new cars they can’t afford, and house payments they struggle to make. Most of them will tell you they are doing fine. A lot of people can’t afford to pay cash for an unexpected $1000 emergency but have a nice credit score.
I guess none of those are on OSA


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Maybe they are and aren't posting, but don't hate if there's folks that use credit smart. I was cash only for 8 years of my life before I decided I had the income and discipline to rock my credit card system. I make lots and lots of return on it but the fundamental core is the following.

1. Never carry a balance.
2. Never miss a payment.
3. Never buy anything I wouldn't otherwise buy (see point 1.)

That in place I take in serious return. Consumers like me are both the credit card companies dream and nightmare because while they make money on transactions they don't make money on interest or fees.

Anecdotally there are enough of us that its getting harder to take in the same return because the card companies are reducing benefits and bonuses, even before covid. Which has driven down the companies ROI although it's still a profit center for them.

 

[dennishoddy]

Like JaySTaylor62 above, I go through lots of cards per year --- and make tons of money in free travel. So I like to think I am probably more up to speed on this than most people. That said, a couple of points:
* It is a routine thing that they'll drop the credit limits if the cards aren't being used. To the best of my knowledge -Pjackso's explanation is correct. They don't want the liability in case someone has the ability to charge up a bunch and not pay it.
* Reduction in credit lines can and will hurt your score. The reason being that a big component of your score is debt to utilization ratio. This is a global measurement including all lines of credit secured, unsecured, mortgage etc. So if the credit line drops, the utilization goes up, which drives the score down.
* Similarly, letting cards get canceled can hurt you. Another metric for credit score is "average length of credit". I've got a few cards for 20+ years that I baby because they anchor my credit average while I rotate 2-3 cards a year.
* Why does it matter? Each of the cards I get has a sort of "base value" and their "bonus value". Let's say I get a 140k bonus for Hilton, what is that worth? On average their points are worth $0.005 each meaning a value of $700 for the bonus. But on average I redeem them for .01-.014 making the bonus $1500-$2000 of hotel stays for my family. Airlines are the same --- on average I value airline points at 1.5 cents each.
* A real world example is that I booked a trip to Hawaii for three a while back:
Paid 60k of Citi points for $2400 worth of flights (4cents a point)
Paid about 160k of Hilton points for $3000 of hotels (1.87cents a point)
Paid about $600 out of pocket for rental cars (getting those on points is worthless)
So at the end of the day I got around $5500 for free. Most of those points were acquired free on bonuses for spending that I would have already done --- I just spent smartly when going to acquire the bonus. I think the Citi points were a bonus from putting a down payment on my truck for instance.

Credit is wonderful if used correctly. Without getting into a masters class on it, I'm getting on average 3-10% back on most purchases, have no liability if my card is compromised, get upgraded seats in planes, airport lounge access, free bags, purchase protections, trip planning, return and warranty protections, cell phone insurance, and a host of other benefits. If I didn't believe in the travel aspect I'd at minimum be getting 2% cashback compared to using cash or a debit card and 2% is 2%. Travel cards work best for me because I travel for work and can stack my work's spending on there and sometimes triple my intake of points for free.

+1000 on the travel cards. Before retiring I traveled a lot for the company with others. Some BIL of some executive downtown was the "travel agent" and booked all flights for everybody in the company. The person was an idiot.
We had to go to Detroit, and be there Monday morning. The "travel agent" booked 6 of us to fly on Sunday. Even though American had a direct flight to Detroit, it was cheaper for us to fly to Houston, sit there for 6 hours, change flights, go to St Louis, change flights and then on to Detroit.
4 of the 6 were hourly and two were salaried. Those of us that were hourly drew double time on Sundays. The other two got nothing to travel. By the time we tallied up our drive time to the airport, (most was an hour to two hours), waited for the required two hours in the airport before boarding and all the layovers plus the return trip that took all day, our trip cost the company twice what American could have flown us on a direct flight and the money came out of our local budget.
I convinced the Plant Manager to let me book everything and he agreed after seeing the numbers. So I had every ones travel, hotel, and dining expenses on my CC for air miles. Filled out an expense report at the end of the trip and got reimbursed. Did that for years.
Also American gives you multiple miles per dollar if you dine at selected restaurants, and places like bass pro and cabellas right now are offering 7 miles per dollar spent for online shopping so your right saying the biggest bang for the buck if you travel is the airline card. Cashed our points in several times for different free flights.

 

[Rez Exelon]

I convinced the Plant Manager to let me book everything and he agreed after seeing the numbers. So I had every ones travel, hotel, and dining expenses on my CC for air miles. Filled out an expense report at the end of the trip and got reimbursed. Did that for years.

It was a very sad day when my company forced a corporate card down our throats. I did some math that I'm losing about $300 worth of travel points per average trip while they are paying an extra 300-600 in higher rates, foreign exchange fees and loss of other benefits. It doesn't make sense. I can still get away with it on some trips and expenses but the good old days are gone. Each on of my trips is usually enough to hit the spend bonus on a new card, so I would usually just open a new one before a trip, collect the bonus and then wait 6 months and rinse and repeat twice a year. Was a massively effective way to drive my points up.

 

[dennishoddy]

It was a very sad day when my company forced a corporate card down our throats. I did some math that I'm losing about $300 worth of travel points per average trip while they are paying an extra 300-600 in higher rates, foreign exchange fees and loss of other benefits. It doesn't make sense. I can still get away with it on some trips and expenses but the good old days are gone. Each on of my trips is usually enough to hit the spend bonus on a new card, so I would usually just open a new one before a trip, collect the bonus and then wait 6 months and rinse and repeat twice a year. Was a massively effective way to drive my points up.

I've read some company's want the air miles donated back to the company if you use your own travel card so they can be used for future savings.

 

[Rez Exelon]

I've read some company's want the air miles donated back to the company if you use your own travel card so they can be used for future savings.

Some companies have agreements with the airline that they retain base miles even. I'd have straight left my job if they did that. Just forcing me to the corporate card was effectively a $4500 paycut since I lost all the points from my cards every year.

 

[OKCHunter]

Wow, not a single poster admits to carrying a balance on a credit card. I guess the

Maybe they are and aren't posting, but don't hate if there's folks that use credit smart. I was cash only for 8 years of my life before I decided I had the income and discipline to rock my credit card system. I make lots and lots of return on it but the fundamental core is the following.

1. Never carry a balance.
2. Never miss a payment.
3. Never buy anything I wouldn't otherwise buy (see point 1.)

That in place I take in serious return. Consumers like me are both the credit card companies dream and nightmare because while they make money on transactions they don't make money on interest or fees.

Anecdotally there are enough of us that its getting harder to take in the same return because the card companies are reducing benefits and bonuses, even before covid. Which has driven down the companies ROI although it's still a profit center for them.

The other thing to consider - most places charge the same amount whether paying with cash or a credit card. A business will factor in credit card fees when setting their pricing. Those who pay with cash are theoretically incurring some of the credit card fee for those who pay with a credit card. However, the credit card user typically has a reward program associated with the card. Cash is not necessarily the best option to maximize your buying power.

 

[OKCHunter]

Some companies have agreements with the airline that they retain base miles even. I'd have straight left my job if they did that. Just forcing me to the corporate card was effectively a $4500 paycut since I lost all the points from my cards every year.

The company I worked for did the same thing about 6 or 7 years ago. However, my card would still come out every time we needed to purchase supplies, cater in lunch / breakfast for meetings, or any other required expense where I could submit an expense report. I retired in December and do miss the accumulation of those reward points on my AMEX.

 

[Truckdriver]

I've always found the best policy for average use of credit cards is to not use more of your credit line then you have cash. That's the way I do it. Driving over the road, I use my CC's a LOT. I make it a point that every payday, the first thing I do (after putting aside money for household, utils rent etc) is pay my credit cards off. I keep an eye on my spending vs my expected estimated income after household expenses. If I see it coming up short. I just cut my spending.

I do have a CC set aside with a large amount (wont divulge that amount as its nobody's business) for emergency purposes. I also have that cash equal to that cc limit in a savings account.

With proper planning and some serious financial discipline, anyone can have and keep a good credit score. But yeah, huge emergencies such as unplanned medical, unexpected job loss, etc can upset the apple cart. Just need to be prepared and the time to start preparing was yesterday, last week, last year.

 

[jakeman]

Wow, not a single poster admits to carrying a balance on a credit card. I guess they are great and the stories I hear of massive credit card debt are just fiction. Travel points, cash back, and other rewards must have credit card companies going out of business. MANY people have large credit card debt, new cars they can’t afford, and house payments they struggle to make. Most of them will tell you they are doing fine. A lot of people can’t afford to pay cash for an unexpected $1000 emergency but have a nice credit score.
I guess none of those are on OSA


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Poor use of credit is a problem.

Using credit wisely is very powerful.

I know people that don't like to use credit. To each their own.

I'm pretty debt adverse, but I have credit, and I use it wisely.

When I was younger I generally carried a small balance on a card or two, but I haven't done so in many years. When you're making chump change and need new tires or a automobile worked on, like brakes or steering, and you haven't had a chance to sock that money away yet, revolving consumer credit can literally be a life saver.

I build houses as a side gig, and without credit, I couldn't put that extra money in my pocket from the sale of 2-3 houses every year, which is often times a substantial amount of money per year.

I'd say that poorly utilized revolving consumer credit is a pretty issue. Just like gun control, those that want to abolish revolving consumer credit would choose to punish the innocent to protect the few idiots that can't use their credit wisely. I'm not down with that.