Just got an invite to increase my limit with Citi.
I never run a balance and always pay in full and on time.
I read (mainly US articles) that increasing your utilisation ratio is a good thing and would work to increase your credit score over time.
However, I also read in some forums that banks in Australia tend to discredit your credit limit when it comes to taking out a home loan since they treat it as potential debt.
Sounds like catch 22 to me
interested to know how this is calculated?
When we applied for our loan at cba they suggested lowering your credit limit to the minimum , once the loan is approved the limit is then raised back up .
If you don't intend to apply for any other loans etc there's no harm in accepting them.
Accepting these types of increases which don't involve a credit check means that it won't be recorded on your profile.
You can always just decrease them at your own discretion when it comes time to applying for a home loan.
Last time amex "invited" me to raise my credit limit. Meaning I still had to go through the usual process - and that involved another credit check!
I woudnt raise it unless it was actually necessary. If anything, I'd reduce unnecessary limits to make them manageable.
That didn't happen when I accepted the offer from Amex.
when applying loan or other CC, can we just say "im in the process of lowering my credit limit" or "im in the process of cancelling A and B and C cards, so next month most likely i will only have one card with $xxx (lowest) limit"
"Could you please bring in your statement with the lowered limit or the letter of closure next appointment, so that we can finalise your loan."
good one tooblue!
Thanks for the input guys.
I know the decision falls on me, but how many of you would take it versus not?
Right now I can only see a disadvantage to accept the limit increase, does utilisation rate play a role in Australia then?
I wont take the increase unless there is something really substantial for me. Say 60,000 QFF pints.
Apart from hurting my credibility from bank (which doesnt concern me now , another reason is fraud. Some cards allow me to set it to as low as $1,500 and that's the one I use for online purchase predominantly. In the event I got scammed, I would only "lost" $1,500 worst case scenario.
as a credit card don't you get the funds back if you dispute it?
I get calls from the bank, have had my card cancelled on me and even have my transactions blocked some times because they spotted dodgy transactions.
accept it if you need it. Otherwise there's no advantage to a higher limit.
It will only reduce your future borrowing power.
depends on the card.
Generally i've asked for minimum limit on my cards, but have come to realise this is not always the optimal solution.
It depends entirely on what you plan to do with your card, if it's a 'everyday' sort of card that you plan to use often, then a high limit probably isn't necessary, if you have a plan for your credit, then a high limit is advantageous. E.g. i accept any limit increases i get on my citi signature and altitude black cards as they both get used for 0% BT offers, the larger the limit, the larger the benefit (i.e. makes money for me). I would wish that i had a $1M limit!
on my daily use cards, i keep a much more modest limit.
That said, I have enough mortgages for now and won't expect to need another HL for at least a few years. YOu can always cancel or reduce credit limits prior to applying for loans anyway.
How do you make more money by having a higher limit?
0% BT (balance transfer) offers are in all practicality interest free loans.
You could invest that money (safely) in a high interest savings account, or like I do, put it in my offset account.
In any case, you are getting financial benefit for no financial cost.
The only caveat is that once a card goes on BT, then you cannot use it, so always have a backup.
I like that idea, how much of a sting would that have on your credit score though
Any fees involved in setting up the BT transfer in the first place?
depends on the offer, some do charge, some charge interest, consider that most cards have annual fees too, so you need to factor all of those costs in.
The offers I have taken have 0% interest, and no establishment fee, also no annual fee on the card.
There's no hit to your credit file for applying for a BT, unless it's on a new card. The only hit came when you got the card in the first place. Though, new comprehensive credit reporting may change that, but it's yet to be seen how or when.
I just checked my Citi Platinum and they're offering 2.9% pa for 24months
"If you have no balance to transfer, you can still enjoy this low rate of 2.9% p.a. for 24 months. Just tell us how much you need and we can send you a cheque for that amount^. You can use this cash for any purpose that suits you, it's that simple."
Am I seeing a loophole here?
Ubank offers 3.37%, seems like free money to me?
Can someone clarify if there's any issue with taking the offer?
How do you invest money from a credit card into a high interest savings account though, even if they offer the credit card facility won't it be charged at a cash advance rate?
@strikerzebra: Well that's how they've worded it on the website. Seems like they're offering to send you a cheque for any amount and use it for any purpose?
I'm just as confused lol
Oh if it's a cheque then you can just deposit it and use the cash as you wish, that solves that problem?
Then what CC is best for this then?
@strikerzebra: It's being offered on my Citi Platinum, but from jilen's post, you can probably get better rates from higher premium cards. I'll need to clarify if this is actually the case, seems too good to be true
It could be a gold mine, invest that money in shares for the full term then pay it off at the end. Can you use a balance transfer card and roll to another one?
Essentially yes. Works better when there's a better spread between what you can invest at and the interest that they're charging you.
Currently my citi card is waiting for the next 0% BT offer, they offered me 2.9% for 24 months but knocked it back.
My westpac card is on 0% for 16 months.
@jlien: I guess there is an advantage to taking up credit offers then lol
Tempted to put it into a bond fund and hold for 2 years :D
you have to work out how much money it'll actually make. Don't forget tax, it will make all the difference.
E.g. if you have a CC limit of 6k (min for plat) and BT 80% of it, that's $4,800.
If the BT interest is 2.9% and your bond earns 4.5%, then you stand to make $216 / yr (less tax), at the cost of $139, you might not make anything at all.
Ideally, if you had a 0% offer & a mortgage at 4.3%, then you'd stand to make $206 (on a 6k limit) / yr, tax free.
Still probably not worthwhile IMO, hence my comment that the higher the limit the better in this case. Say if you had a 50k limit, that'd instead be 1720/yr.
@jlien: Thanks for that
My increase is only to 9k at the moment which makes an after tax return (assuming your example holds) too low to justify the risk and effort.
But it does give incentive to accept credit increase offers then, especially once you have a mortgage
You don't have to have an actual balance on your credit card to do a balance transfer do you? If i had a credit card for $10,000 available limit could I transfer the whole $10,000 limit as a balance transfer or do i physically have to owe the $10,000 already to transfer?
Thanks
No you don't.
Banks won't know how much balance you have outstanding on your donor card.
Veda now has a section which shows combined credit limits, so when it's functional it could spell bad news for those who chase high limits or many cards when it comes loan time if the banks play ball and update frequently.
IMO don't accept unless you need it, there will always be more offers, or new FF bonus offers around the corner!
if you like to finger your arse hole, Get the credit limit increase, cause that is what the bank/credit provider is doing to you. Fingering your arse hole, to loosen it up for when they F*** you with interest.
Yes, if you're planning on taking out a home loan soon, it can make a huge difference.
Based on a 1 person application, the difference between a $10,000 credit card limit and $20,000 regardless of whether its utilised or not is $43,000 less borrowing power on your home loan. Crazy hey?