[quote=bearishgurl][quote=flu]On second thoughts….Not that I would consider this personally…But I guess someone in serious financial doo-doo…
Hypothetical situation. Let’s say some person has no house to HELOC…. No chance of ownership…Let’s say the person has no savings, no IRA….And has a job that doesn’t really depend on having stellar credit.
But the person has 10 credit cards with $10000 credit line each.
Maybe works out for them is to cash out all credit cards on credit line, and put that money into the IRA….10 credit cards $3000 each say $30000 into an IRA, invested wisely…File BK.
Why? Because perhaps even after one files BK, retirement accounts are off limits.
Not that I personally would recommend this… But just saying….If someone is really desperate.
Chances are, they won’t even go to BK court, but will settle with the collector at much less than owed.[/quote]
flu, the vast majority of cc lenders today have cut down nearly EVERY cardholder’s credit limit, whether or not the account is active or the upper-limits were ever used. This is involuntary and was done to the accounts of the “rich” and “poor” alike.
The cc companies have now realized that too much credit was extended to a lot of people during the millenium boom and are trying to avoid having any more big losses resulting from the mistakes they made in the past.
A cc lender typically runs the credit report of all its cardholders periodically, even if they are current on their payments. Someone who has managed to obtain 10 cards with a $10K-each credit limit AFTER acquiring the card who is checking the credit is a BIG RED FLAG. It gives the impression that the cardholder is amassing a “war chest” so they can default and/or is trying to scam each card account they have by borrowing cash from one card to make payments on another, etc.
cc companies are now wise to the scams of yesteryear. Low FICO score applicants are now either rejected outright or have to post their own money with the cc company to get a “secured card” in order to build their credit back up.
The days of one being able to obtain several high-limit cc’s in a short period of time are over, IMHO.
Card companies like AMEX and Visa Signature (which have no upper limit) constantly review the appropriate limit for its cardholders, based upon repayment record and known regular income and assets. If one walks into any retail establishment and tries to buy something with one of these cards which is REALLY expensive (could be over $500 to over $2K, depending on type of card program and cardholder record), the establishment will have to call for approval first and the cc company may text or call the cardholder to ask them if that is actually them wanting to purchase the item/service. This is done to prevent fraud.
I just don’t see how anyone with ten cards still has a $10K+ credit limit on any of them today.[/quote]
BG,
I think that WAS the case but I think things are on an upswing again. Personally, I didn’t have any credit lines reduced. Quite the contrary. They have steadily increased them. And like you said, AMEX and Visa Signature don’t really limit you too much if you have good credit.
One thing I’ve noticed is that companies are getting more aggressive again (like before) in sending out offers. For example, I’ve been an AMEX holder since 1991 and have a few cards with them. I’ve had a Platinum card for many many years which essentially has no limit. Same thing with a Business Platinum with them.
But recently, they started targeting me with more cards with no annual fees and tons of Membership Reward points. Gold card (even though I already have a Platinum card) also with no limit. Got 50,000 points for that one. Then they targeted me with pre-approved Gold business card (even though I already have a Platinum Business card). Another 50,000 points. Again, no annual fee for the first year and NO set limit. Then they sent me a pre-approved offer for personal AMEX SPG card with $40,000 limit and 25,000 SPG points with no annual fee for first year. Now, they just sent me last week an AMEX SPG BUSINESS card pre-approved offer. You guessed it, no annual fee for first year plus 25,000 SPG points and $60,000 credit line.
I’ll just cancel the Gold cards now or before the annual fee kicks in that I got the reward points on. Same with the SPG cards.
On top of that you have to figure that I have several other credit cards all with high credit limits. They can already see that I have all of this unused available credit yet they are offering me much more! AMEX knows every card I have because if you pull your credit report, you can see AMEX checks up on it’s customers every month or every other month which I found interesting.
Also, I own a few companies. LLC’s. When I had to call in to accept the SPG Business card offer they even asked if I had any other companies I wanted to “take advantage of this offer”.
Based on this, I’d have to say AMEX and other banks are really wanting to dole out a LOT of credit to people that have solid FICO scores and low/no debt. In my case, I don’t carry revolving balances. I pay off my balances each month but I always charge everything to get miles or points. (You name it and if I can earn miles/points I’ll do it. Even property taxes, monthly HOA fees, country club dues, medical insurance premiums…. just about everything that can be charged).
The problem I’m foreseeing is that even people with solid jobs, high net worths get sucked into the trap of using this leverage and possibly using it in the stock market or possibly to buy real estate.
Forget about the people with low FICO scores and low/no credit limits. I don’t see the big risk there. What I’m forecasting and seeing the true risk will be the people like me that are getting showered with these offers. It could be a recipe for disaster if people decide to try to leverage some of it. After all, we all know people get sucked into the “keeping up with the Jones” mentality.
What I’m seeing is that banks are severely restricted now by what they can and can’t offer. Many of the products and fees they once could charge or offer to their clients has vanished with various regulations and laws. So there is increasing pressure on them to find ways to make money.
I don’t think they are being crazy and offering credit to people with bad FICO scores, which I think is wise. But what happens with the people that have great FICO scores that are getting showered with all this new credit that decide to leverage it? I guess that’s my concern.
[quote=spdrun]OK, even two cards with a $10k limit plus $5k cash of your own would suffice for $100k of investments. Get a margin account, dump $25k cash into it (prerequisite for a pattern day-trader account). You then can get up to 4x margin.[/quote]
That’s the problem. I do think there are people out there that are starting to do this. With interest rates anemic, I think people now more than ever are chasing risky and volatile investments. Before, it’s one thing like in AN’s example of using these for a guaranteed 6% safe CD. But this is an entirely different environment.
And of course, you have senior citizens and people that are retired that are the last people that should be in some of the riskier and volatile investments but they are “chasing” returns just like many others. They can’t cut it in the 1% interest environment so they are being forced to try to make a higher return in other places.
