I signed up for an American Express preferred Blue card and got approved for a limit of $25,000. I have a 830 credit score. I realized that the places I shop don’t accept that card and you have to pay for it yearly so I canceled it.
Then I decided I was going to get a Costco Visa. Once I signed up the credit limit was only $5,000. So I canceled that one. So I stupidly signed up for a Wells Fargo Visa and that was $4,000.
Don’t leave yet and please don’t make fun of me but I’m not done being stupid. I decided I wanted a different American Express card and when I signed up for it the credit limit was $2,000 so I canceled that one.
Again I know I’m fucking stupid but how bad did I just fuck up my credit?
Credit cards = Free Money
1-5% cash back at most stores
So you can either pay in cash (or debit card) and get nothing. Or you can use a credit card and get 1-5% cash back
I need to spend $300 on groceries this month. If i had a credit card that did 5% on grocery purchases (one reason for multiple cards), then I’d have an extra 15 dollars this month. 180 dollars a year just because I used a credit card for a purchase I had to make.
I could have used my debit card, and the funds could be pulled directly from my checking account. Or the funds will be pulled directly from my checking account at the end of the month when I need to pay off my balance.
If I had an emergency $300 dollar expense in the middle of the month, I would have access to $300. If i purchased the groceries with the $300 in my checking account, I’d have no funds to hold over for 2 weeks. Longer if needed, a credit card can hold a balance for a price.
There really isn’t a reason why you shouldn’t use a credit card in America, other than poor spending habits
Credit cards can even give you perks like free cell phone accident protection when paying your wireless bill
Have multiple cards with multiple limits = higher available debt
The higher your available debt, the less percent you use out of it
Debt utilization is a big part of a credit score. And just getting that down having multiple high limit cards is a strategy.
Like if I spend 5k a month. One card with a 10k limit I am using 50% of my available credit. If i had 3 cards with 15k limits, I’d be using ~10%. Using 10%>50%
Opening up cards hurts your credit score in the short term but helps in the long run. You shouldn’t close a card unless you have to because having it is going to help your score for reasons mentioned above.
I have a really good credit utilization rate, in part because of this. I don’t spend money I don’t have, because I make enough money to cover my needs, set aside savings for emergencies, and treat myself sometimes. And I’m privileged to have people in my life who educated me about credit, what it actually means, and how it works.
Because of these privileges, using credit cards has saved me money by earning rewards and not paying interest. But many Americans don’t have these privileges, which is why I think it’s downright irresponsible and predatory that my combined credit limit is higher than my annual salary. Not home or car loans or whatever, just regular credit cards for regular consumer purchases. That’s a life-ruining amount of credit to have available if you haven’t been taught how to game the system.