Citibank Signature Card - Reducing Credit Limit from 15k to 1k?

Alex10 on 28/04/2020 - 11:29

I have a Citibank Signature Card with a 15k limit. It has the fee free for life from the OzB special years ago.

I'd like to apply for a home loan in the next 6-12 months so would like to have a lower credit limit (instead of cancelling the credit card completely) to potentially increase my borrowing capacity or eligibility.

When I try to lower the credit limit online it says "The credit limit you have selected is below the limit for this product".

Is there a way I can achieve this goal?

Note: I was going to cancel the credit card as I don't need it (I just use debit credit card now) but I read that it could be more beneficial to keep it so the bank sees that I've always paid off credit card in full every time without any being late. Any tips appreciated.

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Comments

  • tio on 28/04/2020 - 11:36
    +4

    not really, miminum credit limit for that card is $15k. Haven't heard anyone was successful getting lower than min limit for a credit card.

    • UrMumsOnlyFan on 02/05/2020 - 16:03

      I recall someone commenting that they'd managed to get the Signature limit reduced below $15k. The claim may or may not have been true, but it prompted me to enquire through the online banking messaging (just checked and that was back in September). Unsurprisingly there was no reply and I never bothered to follow up.

      I also seem to recall that for certain credit cards there is a minimum limit at application, but once you've got it you are able to reduce the limit later down the line. Memory is hazy but I believe I've done it before.

  • mbck on 28/04/2020 - 11:37

    i think the lowest for that is 15k (signature card)

    Platinum has 6k as the lowest.

    Then the rest are 1k or some can be even less

  • sempro on 28/04/2020 - 11:37
    +7

    I was in the same situation as you are a few months ago.

    Citibank would not even decrease my limit by a buck. Even calling them up and begging didn't help.

    I ended up closing my Citibank Credit Card and use a debit card.

    I believe closing your credit card would improve your home loan application as it did for me.

    Good Luck.

  • jay889344 on 28/04/2020 - 11:41

    Nope - min limit for it is $15,000 so your real question is whether you cancel or keep?

    • Alex10 on 28/04/2020 - 11:43
      +1

      Yes you're right, now that I know I can't reduce the limit. Should I cancel or keep?

      Sempro's experience says cancel is winning.

      • desparito on 28/04/2020 - 11:46

        i did try to lower limit as i would be refinancing soon but didnt happen as 15k is the lower limit. I cancelled my card.

      • meowmeowmeow on 28/04/2020 - 11:55

        Wait until you apply for the loan and if the bank asks you to cancel or lower the limit, then consider cancelling. I don't think a 15k credit limit would have a material impact on a mortgage application…

        • Alex10 on 28/04/2020 - 11:57

          You could be right, but since I do not need the credit card at all. The question is if I am at an advantage to keep the card or to cancel it.

        • Skramit on 28/04/2020 - 11:58

          This is good advice. I had my home loan bank ask me to cancel one of my cards to approve the loan. So I did. It was not big deal to them, standard operating procedure.

        • FTTNope on 28/04/2020 - 12:49
          +2

          All credit cards impact your borrowing power regardless of whether you owe a cent on them or not. They're a liability for the lender. Depends how close to the wire the mortgage application is.

        • vietbargain on 28/04/2020 - 14:49

          wrong. $15k credit limit will have material impact to your borrowing power and serviceability. different policies for different banks.

          • miwahni on 28/04/2020 - 21:48

            @vietbargain: Exactly. That's a $450pm repayment that will be factored into your affordability as a liability. Have you asked Citibank if they can swap the card to a type with a lower minimum limit?

            • El-Rhi on 29/04/2020 - 14:25

              @miwahni: It’s actually $570. ASIC requires monthly liability for credit cards to be 3.8% of limit. Either way, it’s material.

      • dimitryp on 29/04/2020 - 10:14
        +2

        Cancelling is definitely the thing to do. The fact that you've been paying it well is in your credit report. We cancelled our ones before borrowing for mortgage, on advice of our broker.
        Holding the card will significantly reduce your borrowing capacity. The way they calculate it is they assume that you could be in a "worst case" situation with a full card and needing to make those max repayments as a monthly liability. So that'd be $15,000 * (20% interest) / 12 (to get monthly) = $250.
        If you reverse engineer that into borrowing capacity, at 3% mortgage, it'd reduce your borrowing capacity by around $100,000.

        disclaimer: im not a mortgage broker or banker, just using educated guesses for the above

      • jay889344 on 01/05/2020 - 08:30

        If you're going through a mortgage progress, dfeinitely cancel mate unless you're likely going to be approved for far more than you need anyway

  • TheMindsetTraveller on 28/04/2020 - 12:06

    I would cancel unless you have a fee free for life Signature Card …

  • tsunamisurfer on 28/04/2020 - 12:09
    -5

    A $15k exposure is small compared to a mortgage, if you are $15k away from being eligible for a mortgage you are close.

    I would ask the broker to pull strings, you won't get that card or any card for fee free lifetime with reward points again.

    • Gotchas on 28/04/2020 - 13:21

      Borrowing reduces by 5x your max limit

      So 75 k less of loan.

  • GangGang on 28/04/2020 - 12:37
    +2

    Bank manager didn't really care that I paid off my CC on time the past several years and didn't miss a payment. It's a liability to them that you have one. I cancelled it and it dramatically increased the borrowing power. 15k limit credit card doesn't mean you can increase your borrowing power by 15k in your home loan, not on my previous situation anyway.

    My CC was only 2 cards at around 3k & 6k. It helped alot when I cancelled.

    • Cluster on 28/04/2020 - 12:42

      Yes, that's right. Lenders don't care if you pay your bills on time. They only care if you have a habit of being late.

      I would recommend people who want a loan have a look at their credit report. You can get it online for free once every 12 months from most companies. Current credit cards appear as "Balance Limit [Maximum Amount of Credit Available] $XXXXX". The lender doesn't see any usage of the card, just that you have it. They assume you have maxed out the card or could do so. Past credit cards appear there for 5 years (afaik) but have a limit of $0.

      • GangGang on 28/04/2020 - 12:53

        I did a credit report 2 months ago with equifax & I never recieved a credit score number. Only my accounts, cards, loans etc over the years.

        It was pretty good to see but no number.

      • Typical16-bitEnjoyer on 28/04/2020 - 13:50
        +4

        . The lender doesn't see any usage of the card, just that you have it.

        This has changed since Comprehensive Credit Reporting (CCR) was implemented. All the big 4 report for credit cards.

        "With CCR your credit report includes additional information like the dates you opened and closed your personal credit account, account type, credit limits you have and up to 24 months of repayment history."

        Regardless, as many have said, the banks view the credit limit amount as the full liability owing in applications regardless.

  • friedsnowdays on 28/04/2020 - 13:10
    +2

    Just to add something to the topic but one of the key things banks look for is your ability to service a loan (do you have the available cashflow to pay for your loan after living expenses and existing debt).

    By having a credit card the bank needs to consider a worst case scenario (you've maxed out your limits) and will work out how much money you would need to make your credit card payments and will subtract this from your available cashflow. The lower the cashflow you have to service a mortgage, the lower the amount of money you can borrow.

    If you reduce your $15k limit on the credit card I would expect your eligible mortgage amount to increase by a lot more than $15k. This is because a mortgage is a lower interest rate loan with a MUCH longer time period to pay it off, therefore each dollar freed up for cashflow can go further.

    The same concept will apply to personal loans, buy-now pay-later accounts and general expenses you have.

    This all being said, I would probably just wait for the bank to tell you whether they want you to close it.

  • conan2000 on 28/04/2020 - 14:59
    +4

    Just make the home loan application when you need to, the bank will tell you if it's necessary to reduce your credit card limits. I had to do that recently. This was with HSBC and their assessors assume that ~3% of your credit card limit is monthly expenditure. I had three cards with a limit of $85k between then, reducing this to $60k total improved my borrowing capacity by something like $200k. Removing a $15k credit card limit on this basis would increase borrowing capacity by almost $110k.

    Really depends on your situation, income, expenses, existing debts etc as to whether you need to do this. But no need to do it in advance.

  • netjock on 28/04/2020 - 16:39

    Got a reward platnium from like 10 years ago with fee free for life. Managed to drop it from $15k to $10k (April 2019) told them due to mortgage application. Only thing they did was warn me to increase credit limit requires a more detailed assessment due to new rules.

  • kurovon on 11/05/2020 - 15:32
    +1

    You weigh up the benefits but most of the time it's better to cancel the card. I cancelled my credit card after using my debit card for a solid 3 months; I was using the credit card as part of my offset strategy but once I exceed my offset loan amount I switched to debit. I was looking to get a home loan in the next 6 months so I got rid of it to improve my loan capacity however I realized I then lost the freebies of the CC i.e. complimentary travel insurance, purchase cover and extended warranties that came with the card - n/a in your case as you don't have an annual fee but I had paid it and it was wasted 4 months in the new period.

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