9/9/2011 1:00 PM ET|
4 myths of credit card limits
Not understanding exactly what your limit means could result in lower credit scores or expensive lessons from the school of experience. (Read and learn the easy way.)
Although the definition of "credit limit" is straightforward -- it's the maximum amount you can borrow on an account -- a variety of misunderstandings surround the concept.
Here are four myths and what you should know to manage your credit cards effectively:
Myth No. 1: My credit limit is my spending limit.
Actually, your credit card spending should fall well below your credit limit. Most experts advise keeping credit card balances to 30% or less of credit limits. Using too much of your available credit hurts your credit score.
Myth No. 2: An increase in my credit limit means I can afford to charge more on my credit card.
Your credit card company might raise your credit limit after you've paid your bills promptly over a period of time. At that point, the issuer sees an opportunity to make more money. The higher the balance you carry, the more interest the credit card company earns.
Don't interpret a credit-limit increase as permission to go on a spending spree. Your spending should fall in line with your long-term financial goals and monthly budget.
Myth No. 3: My credit limit has nowhere to go but up, especially if I pay down my credit card debt.
Many consumers learned this was untrue last year, when credit card companies slashed limits in a reaction against previous over-lending. In some cases, consumers whose credit limits were cut were doing all the right things -- paying their bills on time and paying down large chunks of their debt. This is one change that credit card companies can make without providing advance notice.
Myth No. 4: I'm stuck with my credit limit.
You can ask for a higher credit limit by calling your credit card company, and you just might get it if you can show your financial circumstances have improved. You can also opt in for a program that allows you to go over the limit -- for a fee. Before new federal credit card regulations kicked in, many companies were letting their customers go over their credit limits and then charging fees for the privilege. Now, customers must opt in for such programs.
View credit limits dispassionately. Don't let dampened credit limits get you down, and don't let high credit limits go to your head. Use your head instead to set your own reasonable spending limits.
This article was reported by Barbara Marquand for IndexCreditCards.com.
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Ok losers. This is why our country is in terrible shape. People like you who want to blame "THE BANK" and blame finance companies for your stupid pathetic life. This statement is directed at people who blogg stupid things, that they can't understand. If you bought a new TV and put it on your credit card because you didn't have the money to spend, guess what -- you can't afford the TV. If you maxed your credit limit because you bought something you couldn't afford, don't get mad when the company who charges you fee's that you already agreed to pay. Most of you don't know what you've already agreed to when you swiped the card for your first use. Once you swip your card for the first use, you have agreed to the terms and conditions of the card (including crazy fees and penalties). Sorry Dave (sgfsgs), but when i collected on credit cards, i made about 4 times the amount of $8/hr. serious. What i'm trying to say is, people need to be more responsible with their purchases and KNOW WHAT THEY ARE AGREEING TO. If you bought a home you coudn't afford and blame everyone but your income, get a real life. I have never owned a credit card. i pay for what i can afford. i have a collge degree with no student loans. i have 3 vehicles and have no monthly payment. My wife and i have a 3 bedroom house that we can afford. I was just laid off last year and found a job in 7 days making over $40K a year (not rich). When i was laid off, i never filed for an u/e check. i'm 33 years old and have never received a u/e check in my life. I have never had the prob you people speak about, because i buy what i can afford and nothing else. Get a clue. Don't raise your children to expect that debt is a way of life. stop blaiming other people for your actions. This country is in the toliet because of lazy, selfish, stupid, godless people. Break the 4 generations of welfare in your family. Get a 2nd job if you have to, but don't blaime greedy banks for your problems. We know banks suck. We all know they are heartless, greedy people. BE RESPONSIBLE. THEY WON'T BE. . . GOD BLESS YOU ALL.
i'm sooooooo tired of people coming in here turning EVERY FREAKIN article on the internet into their opportunity to get on the soapbox about their political beliefs. You're a conservative or you don't like the government or the current administration. OKAY...WE GET IT!!! If this is you and you need to hear it, then here it is: YOU KNOW EVERYTHING!!! THE WHOLE WORLD SHOULD COME TO YOU FOR ANSWERS!!!
Check your facts. Lots of people, like in the 60% range, do exactly what 19 is saying. I'm one of them. You still have to live within your means because the bill is coming soon. Having a credit card doesn't give you a license to spend yourself into the poor house and then cry about the world being unfair. Credit cards give better protections to the consumer as well as rewards when you use them properly. I have been able to dispute problem merchants and get my money back, have items replaced even though it was my kids fault (gotta love AMEX for purchase protection), and get a hefty some of money back at the end of year just to name a few nice perks. A credit card is tool, use it wisely and within your means and stop blaming the world for your problems.
Sounds to me like you have had some bad experiences. And I have a feeling those came from not being prepared for life or financial life. I suggest looking into Dave Ramsey or a similar program. The only thing you and I will agree on is life does happen. It's how you meet it, prepare for it, and deal with it that will determine how you and your family will come out on the other side. I watched my single mother struggle to make sure we had a roof, clothes, and food......the needs not the wants. I can say that all the children and my mother made it out on the other side just fine. Never once did I hear how the world screwed us, just how to save and live within our means. Which back then wasn't much. So please don't lecture to me about life and how hard it is. To think otherwise is a fools paradise.
Good luck! Hopefully you will be able to someday understand how to use things like credit cards to your advantage.
I agree that stuff happens. I've had to learn how to survive off of 13,000 a year. If you do the math that's less than $10 an hour. Unlike some people I was lucky because I didn't already own a house and my car was paid off. I had to live off the money I had saved to buy a house to survive. My dreams have been swept out from under my feet. I had to downgrade my apartment from decent to fighting the spiders, roaches and creepy crawlies that were everywhere. You don't think that makes me feel like the worse mom in the world? When I went to go get housing assistants I got put on a 3 year wait list because I have a job. I'm not going to put anyone down who is trying to prevent their family from losing their hard earned American dreams. You know how many people quit their jobs and live COMPLETELY off the government when their kids get cancer? its A LOT I had non Hodgkin's lymphoma and the Drs would tell you to do that so the kid could have medicaid. You might lose your car, if its worth anything, but hey who cares right? that's not stuff happening to you! That's just being selfish because you pay your doctor bills and struggle to keep the rest of your crap (hope you all know what sarcasm is) and excuse me if I'm no longer married because I'm tired of the fear of catching STDs from my husband. For everybody else who is spending just because and don't care if they are in debt oh well, they'll get help when they need it.
seems to me if you dont have alot of cash a credit card is no good so i guess its all a fun game and if you dont have a lot of cash u cant play with the big boys so stay away from a credit card unless u wanna or can play this high stakes game
This issue is no different than what we have all been watching the past 3 long hard years now. If people want to dig a hole, take the money out of it and stand in the hole, okay. Stand there. But, when the hole gets too deep, don't dig any more. No need to blame a bank because they have money to loan, that is what they do. Would you buy a home you would not be able to afford?
Suck it up, live by your means. Or, just charge charge charge charge it.
My wife and I keep about $40K in a inerest paying account to pay off any credit card bills or any emergency we might have. We also have about $500K in liquid assets if we need it right away, plus rental property and other investments. I know how to use credit cards to get every penny I can to my advantage. No way anyone can tell me cash is better than credit. Like I said I have always worked for a living, but I learned how to make credit cards pay for me. I have never paid interest nor have I paid an annual fee to use my credit card. I was in home depot this summer and purchased over $1,000 worth of stuff and paid with it from points from my credit card. This is what I call credit card is better than cash, but I guess if one cannot manage money they do not understand how to make a credit card work for them.
Micha, thanks for the kind words, but you are incorrect also. . . Sony is a great company, but they are not the only company to not recieve a "BAIL OUT". People who say we "BAILED THE BANKS OUT" are completely misinformed. Although i personally hate ALL banks, we all need to be informed (repels anger). If i owned BANK "A" or "X" during the so called "BAILOUT PERIOD", I would need to have as much cash on hand as i did out in loans. If i didn't have that much cash on hand, the government would force a loan entitled "TARP". By now, if you don't know what the TARP fund was allocated for, don't worry, your already part of the problem. The government forced a loan on Banks during this period. The country isn't broke because we BAILED OUT BANKS ! HERE IS THE AMAZING DIFFERENCE. MOST OF ALL the banks have already paid back most of the LOAN (WITH INTEREST). This is more than most of Americans who are overly in debt actually do (pay there bills). We are off track on this blog folks. I'll stop. someone read the question and start again. FYI. this is my 3rd blog ever. love it.
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