Credit Cards
Posted by Victoria | Filed under Victoria
Today I phoned the bank to cancel my credit card. Not to cancel the account, mind, but to ask for a new piece of plastic, the first having been lost — as I mentioned last week — somewhere in the wilds of New Brunswick. I put a hold on it almost immediately (and well before anyone else found it, if they have), spent the week making sure it hadn’t just fallen into my purse or down the side of the car somewhere, then decided enough was enough, and phoned about it. No problems, of course, unlike the time I phoned about reducing my limit, where I was given enough of a hard sell to make me back off for a while.
In the mean time, I missed a monthly donation I like to make through Canada Helps; was slightly late paying for my CSA (Community Supported Agriculture) box, as it had to go by cheque and the long weekend delayed things; and nearly forgot to pay my phone bill, which I eventually did using my other credit card. Only the Canada Helps donation is an automatic payment, as I don’t really like having my information everywhere. Though I do think it was saved on the Air Canada, Porter, and Abebooks websites, the places I use the credit card the most.
Now I have another credit card, my first one, through another bank. Since I payed it down last year (the first of my debts I paid down, its fully unused credit limit a continuing minor source of pleasure), I’ve used it rarely. I don’t get any points through it, which I do with my other credit card, the one I lost. It has a credit limit that is thousands of dollars above what I need or want to need it for.
I have been considering asking for the credit limit to be dropped — and this time being firm about it. With two cards, I don’t need a great amount on both of them. Also, as I found with the length of time it took me to pay down my other credit card, I really don’t want to get back into credit card debt. I have been trying hard to build an emergency fund, so that even if I have to put something (like the flights to my grandfather’s funeral earlier this summer) on the credit card, I can pay it off quickly, without the 19.99% interest accumulating as it so quickly does.
These are just musings, I’m afraid. I keep wondering if I won’t need that high credit limit — but why? That was the argument the Visa person used. At the moment I don’t have any problems keeping the cards paid off, but I do know that once I start paying for regular things with it I add in those extras that, alas, add up. (I buy one book and suddenly that second one doesn’t seem like an extravagance any longer. It’s terrible.) I don’t want to be in the position that I need to use my credit cards as my emergency net — and I’m not right now. But yet . . .
How do you use credit wisely? Is two cards good? Too many? It was surely convenient to be able to pay my phone bill while travelling instead of having to wait until I got home to get my chequebook. But it feels like a dangerous slope to have two, both of them with high limits. Identity theft is sadly very possible, and I’m just lucky that I lost my credit card rather than having it be stolen, and that I noticed before it was too late.
Working on finishing up a PhD in Medieval Studies, what Victoria really wants to do is walk around the world and write books. Twenty-nine and single, Victoria lives in Halifax and is trying to balance work and life.
July 6, 2012 at 7:34 am
I’ve honestly never thought about lowering my limit. We always pay them off (we have two) and I’ve never been tempted to max them out.
July 6, 2012 at 7:56 am
I hadn’t really thought about it too much until I lost the card, then started thinking about the headaches that would happen if it had been stolen and I hadn’t realised until too late. Also, if I ever want to get a mortgage, I believe they count all *available* credit as a form of debt, and that’s when I’d want it to be a lower amount.
July 18, 2012 at 12:56 pm
I don’t know much about banks considering available credit (on a card) when considering you for a mortgage, it might be true- I know that is definitely true for empty lines of credit.
In one of Gail’s articles she mentions that using a small portion of what’s available helps your credit rating, because it shows that you are in control of what you borrow. For example, if you have a credit card with a $5000 limit but routinely charge $1000 or less on the card it helps you build a strong credit rating. I think the magic number is if you spend up to 30% of what is available…I might be wrong with the percentage though.
July 18, 2012 at 1:43 pm
Okay my mistake- I can’t find the article I was talking about, I’m not sure where I read it now! But you’re right about unused credit cards affecting a mortgage application, Gail mentioned that in one of her tips. I never knew that, very interesting!
July 6, 2012 at 9:39 am
I have two credit cards. An AMEX costco cash rebate card and a visa rewards card. For the most part I think one credit card is sufficient but for me, I find that AMEX is not accepted in a lot of places so I like to have a card that is also widely accepted. So if I can’t earn rewards using my AMEX (the rewards I really want) I earn rewards using my VISA and pay them off every month. Having more than two cards is a lot more work to keep track of.
July 6, 2012 at 9:44 am
We currently have 5 credit cards between my husband and I. Three major cards (one of which we are about to cancel–because it is held by the same bank as our bank accounts, and Gail advises against that) in his name, one in mine (just to keep a credit score of my own while I’m married) he also has a rarely used store card. Most of our credit cards have low limits. One is quite high, but as we are planning to purchase trans Atlantic airfare for four with it next year, we’ll let that one be.
As of May, we no longer carry any balances (Thanks Gail!). I track ALL spending in my budget binder, and if that second book isn’t in the budget, I don’t get it. Even though we’re out of debt as of last month, we don’t have the savings we need or much disposable income. Yesterday, I had to choose between magnetic words for my daughters or new shoes for myself. Well… my shoes have a visible hole in them, so my girls will have to wait until next month or longer for the magnets.
I recently lowered an $11,000 limit to a $2000 limit. I have lowered limits many times in the past (remember when they used to go up automagically?), and they always give me a hard time. But I know what I want, and I persist. They are also always trying to sell me really expensive balance insurance. We’ve found they’ll do anything… even sneak it on and leave it up to you to notice and demand your money back!
As far as credit card discipline… our experience with Capitol One was enough to scare us straight. Soaring interest rates, lowering your limit so that you go over when you aren’t expecting to, refusing to tell you the actual hovering rate of interest… they play some serious hard ball. THAT card got shredded.
July 6, 2012 at 10:30 am
I work at an FI and we do use your limit for debt servicing so if you come in for a loan or a mortgage and have a lot of high credit card limits it can affect the ability to get credit and if your trying to lower limits or close at that time it can slow things down for you.
I advise my members to have one or 2 cards wih limits that they would need or use, don’t have credit you don’t need
July 6, 2012 at 1:12 pm
I think two credit cards is plenty. I had the limit on my Amex card lowered as it was too high considering I pay in full each month. I have kept a higher limit on my Visa as I use it for booking flights and other travel costs. If something goes wrong with travel arrangements it is much easier to recover costs if you use a credit card than if you use a debit card or cheque.
July 8, 2012 at 2:38 pm
@Victoria…the thing that caught my eye in your story was the 19.99% interest that you’re paying. Try to lower that and things will go smoother even more.
July 10, 2012 at 10:22 pm
I agree…one or two is enough for one person. I am planning to go down to one by the end of the year. I will be giving up my amex once it is paid off…I like the ability to use it at costco and get rebates but I discovered I don’t get enough rebates to make it worth it…for me. I’d rather pay cash there as it also lowers the “I need it” mentality when I see all the great options I didn’t plan on buying before arriving. I too have/had very high limits. Amex dropped mine by half almost 2 years ago and I thanked them…my MC is fine as it is but I will have it greatly recuded once it’s paid off or close to it. I worry about the fraud possibility too but don’t want to call and drop it multiple times or be too close to the max and get a negative rating per Gail’s advice. Ahhh! all the things to consider/worry about!
July 18, 2012 at 4:45 pm
I have a credit card that gives me cash back. I’ve never made money using a credit card before, so this is still a novelty to me. I get more points for gas and groceries, which is what I generally use it for. I budget so I can pay it off in full each month. I receive about $50.00 cash back (they send a cheque) every few months. I also have a card that has a low limit that I use for the occasional on-line purchase, which I also pay off in full every month. After many years of always carrying a balance I decided “no more,” paid them off and am disciplined to allow it to never happen again. I make a fairly good income but still live paycheck to paycheck. The difference is that I pay the bills and allot money from each paycheck for food, gas, taxes, insurance, emergencies, retirement, vacation and my additional expenses account, so everything is covered. I’m saving money and I don’t go into debt like I used to. I still earn the same amount, but changing my attitude toward money and taking charge of it has made a huge difference. I wish I had done this many years ago!