I sent off the paperwork this morning to increase Credit Card 4’s limit to $16,300. Good grief that’s a large number!
Well it’s only going to be large for a finite period of time, as I’m going to reduce the limit as I pay it off.
The deal I've made with myself is that I’ll transfer the remaining balance of Credit Card 3 onto it, which reduces the number of cards I have to pay each month, but I’ll be paying both the amounts I was currently paying all onto Credit Card 4 each month instead.
Credit Card 3 was my current focus card, and the one I’d worked out I could pay off by December 31 (to achieve another of my Financial Year Resolutions). To ensure that goal is still achieved, I need to get the total balance on Credit Card 4 to at least $10,000 by December 31. This allows for the amount I was already paying off Credit Card 4, plus the total balance of Credit Card 3.
Clear as mud? To break it down, as at 1 August, the balances of Cards 3 and 4 were:
- Credit Card 3: -$5,466
- Credit Card 4: -$11,197
Once the limit increase is approved & the balance transfer is complete the most the new picture will be:
- Credit Card 3: $0
- Credit Card 4: -$16,663 (it won’t be this much though, as this month's payments on both cards will be applied first)
Then it’s a matter of paying off like crazy between now and December 31. I can’t claim credit Card 3 as paid in full until that goal is reached.
In my opinion you should always take the new credit limit offered by your credit card provider. That doesn't mean you have to use it, but it is actually better for your credit rating to have a large amount of credit at your disposal.
ReplyDeleteFruGal, things are actually different here in Australia to the US, the more available credit you have, the harder it is to get home loans or car loans. Not that I need either of these at the moment, but I'm cancelling my cards as I pay them off to get my credit card available limits as small as poossible.
ReplyDeleteI think the US has a terrible system. Expecially for people like me who have no self control. No wonder their mortgage providers are going under. DD - dont forget to actually cancel and close the old card, otherwise they'll just send you a new card, new offers for credit and hit you with annual fees.
ReplyDeleteDD - I have a question. So to creditors over in Australia it looks better on paper if you owe up to your limit? Is that correct?
ReplyDeleteIf that's correct, you are right it really is different in Australia.
I can't wait until I'm down to paying on only two credit cards, that will be a VERY happy day.
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Hi there-sounds like a good move to me-good luck with the credit card reduction!!
ReplyDelete@My Crazy Debt - it's not quite like that, but when you're applying for credit, for say a car or home loan, they will always ask the total limit of all your credit cards, and the outstanding balances.
ReplyDeleteThe higher your total limit, the less money they are likely to lend you. The reasoning is, you could run up all your cards the day after they approved you for a loan, so they assume your cards can and will be maxed out when they make their decision.
So having a good ratio of debt to credit is important, but having the least amount of available debt is just as if not more important over all.