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The Water Cooler
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Credit card limit cut in half.
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<blockquote data-quote="Rez Exelon" data-source="post: 3373741" data-attributes="member: 5800"><p>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:</p><p>* 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.</p><p>* 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. </p><p>* 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. </p><p>* 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. </p><p>* A real world example is that I booked a trip to Hawaii for three a while back:</p><p> Paid 60k of Citi points for $2400 worth of flights (4cents a point) </p><p> Paid about 160k of Hilton points for $3000 of hotels (1.87cents a point) </p><p> Paid about $600 out of pocket for rental cars (getting those on points is worthless)</p><p> 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. </p><p></p><p>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.</p></blockquote><p></p>
[QUOTE="Rez Exelon, post: 3373741, member: 5800"] 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. [/QUOTE]
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