Your experince (Post BK) re: Credit Lines.

[BxRcvor]

Perhaps, I'm going about this the wrong way as there may be other alternatives but, please, hear me out.

I have, pretty much closed all but two of my credit cards as part of the recovery process in re: my BK. And, while I would truly love to close the remaining two as well, I'm a bit apprehensive of doing so, as I know there are merchants/services etc. that only take credit cards for payment (ie. they won't even take Debit Cards... just credit cards). One of my two cards is connected with my checking account at Cap-One, and it's a very small line of credit so I probably won't cancel that. The other has a bit larger credit line. And I might consider paying that one off and closing it, if there were alternatives. But, right now, I'm keeping that one at (almost) max level and continuing to pay the monthly amounts. If I need something more significant, I'll pay off that much in order to have enough to cover it immediately, then going back to regular monthly payments.

Here's my question. Have you experienced (in re: your BK and its recovery) either paying off a credit card (or almost a complete pay off) only to have that cc company then (at a later point) cancel the card or reduce the credit line to only slightly above what you left on it, due to your BK/recovery status (i.e. low credit score, etc.)? I get the feeling that the card with the larger line is only letting me keep the credit line they have because they'll lower it after I pay it off, which does me no good (I need a certain credit line to cover certain things). I mean, if I could do it with debit cards as part of a checking account, I'd do that in a heartbeat. But, as stated previously, some merchants/services will only take credit cards and nothing else... no debit cards, no EFT service (Paypal/Zelle, etc). So, I do believe one should have at least one traditional credit card with a line enough to cover all the short term expenses you might have that can't be covered another way.

Anyone experience that and, if so, what did you do about it? If there are alternatives, I'm more than happy to listen (i.e. pre-paid credit cards, etc., although I don't know if there's one that will handle what I need for a credit line)...

[shipo]

During my post-BK era before the public record dropped off my reports, I approached my max credit limit on numerous occasions, and handily exceeded it once, and none of my credit card holders dropped my credit limit; quite the opposite actually. When I exceeded my CapOne limit by well over a thousand dollars I paid the card in full a few days later, and then two weeks after that they gave me a 50% bump in my credit limit.

Regarding living without credit cards; I did that for nearly seven years and quite honestly, the experience sucked. Why? I like to travel and most (all?) car rental companies refuse to rent to you if you only have a debit card, and even those who will rent to you with a debit card will not do so when the rental location is near a major airport. I also ran into this renting nicer hotel rooms; no credit card, no room, period.

By the time my bankruptcy fell off my reports I had something in the neighborhood of $15,000 in total credit across three cards, which was, and typically is more than I need (I've only exceeded that twice in total monthly charges, once on a European vacation and the second time when we bought a new home and had to outfit it before and shortly after moving in); fortunately once my credit reports were clear I applied for a few new cards and am currently sitting at just over $99,000 in total credit limit.

Circling back to your post, why are you wanting to cut back on your credit cards?

[justbroke]

As shipo says, so long as you can manage those cards by paying them off, it's no issue. However, I had an FNBO American Express which was converted to a VISA. It had a $5K limit. I didn't use it for a year and they summarily cancelled the account due to non-use. There are creditors that don't like credit just lingering and that is especially true when there's a major economic disaster such as COVID-19. I now know to tease my unused cards at least twice a year by charging something so that the creditor see usage.

[shipo]

As shipo says, so long as you can manage those cards by paying them off, it's no issue. However, I had an FNBO American Express which was converted to a VISA. It had a $5K limit. I didn't use it for a year and they summarily cancelled the account due to non-use. There are creditors that don't like credit just lingering and that is especially true when there's a major economic disaster such as COVID-19. I now know to tease my unused cards at least twice a year by charging something so that the creditor see usage.

Yeah, I tease the three cards I have in the proverbial sock drawer at least twice a year as well.

[BxRcvor]

Circling back to your post, why are you wanting to cut back on your credit cards?

Primarily, I want to convert my philosophy of "spending," to something my grandfather always said. "Make it first.... Spend it second." All this credit card spending is what got me in trouble and into my CH7 in the first place. What I want to do is create my own credit lines. That is, open a couple of checking accounts with a debit card and use that as my line of credit. I pay off the principal back to that checking account. Perhaps, a bit of interest as well just to keep things honest. At least, the cc companies won't get my interest money... I will. But, as stated, and as you even confirmed, some merchants don't take debit cards and want only credit cards (perhaps it's a "regulations" issue with them about liability, etc. or maybe just to show that the debtor is "credit worthy" by having a couple of cards). Anybody can have a checking account with debit cards, unless they're guilty of passing bad checks, etc.

So I need at least a full credit card to cover those merchants who insist on them. That's not a huge amount, maybe $2-3K. This, for the car rentals and hotel stays, etc. Other than that, I'll use my "self-owned" credit lines/debit cards, or I'll "make it first, spend it second."

[shipo]

While I'm not trying to sell you on a different plan, there is one benefit of credit cards which you will be missing out on with your approach; rewards.

I've been tracking my rewards since my Chapter 13 discharge back in early 2020 and in the last nearly 5 years I've earned over $5,000 in cash rewards I would not have earned if I'd been debit card only (which was how I operated for nearly 7 years prior to my discharge). The trick is to force yourself to only buy what you already have the money for, as a result, you get rewards and yet pay no interest.

[rodsren]

And don't forget about airline miles and points (if you didn't burn Chase and Amex primarily, Citi and Barclays to a lesser extend). While these points have been devalued, you can still use ExpertFlier and when a decently priced international seat in business class is available for 57,500 miles (USA-Europe, USA-deep South America) you are getting incredible value for those miles! Seats that ordinarily cost 3,00-10,000 if you are talking NYC-London).

[BxRcvor]

While I'm not trying to sell you on a different plan, there is one benefit of credit cards which you will be missing out on with your approach; rewards.

I've been tracking my rewards since my Chapter 13 discharge back in early 2020 and in the last nearly 5 years I've earned over $5,000 in cash rewards I would not have earned if I'd been debit card only (which was how I operated for nearly 7 years prior to my discharge). The trick is to force yourself to only buy what you already have the money for, as a result, you get rewards and yet pay no interest.

Totally understand about "Rewards." But I see them as the "crack" that comes along with the "cocaine" of credit cards. I am willing to forgo rewards if it eliminates the "temptation" to spend.

[Carmella]

shipo Is there the best time to pay on a credit card to avoid the interest and still have it show up as a positive on the credit report.

Excuse me since I have not reviewed or got to the point of focusing on the credit card credit report game. I had another question if you don't mind me veering off--but I think it was to keep 11% of the credit available on a credit balance to improve the score. Does that mean 11% of your total credit or on the primary card you use. I will have 3 cards and so will my husband so I am hoping there's just one card with a balance and the others used a few times a year probably when we go to a restaurant just to keep active.

BxRcvor I like that the rewards being the "crack" because I have heard, probably on the Ramsey podcast which I like to listen to even if I don't plan to follow everything he recommends, that the rewards are so little compared to the amount of interest people end up paying and I do know that to be the case. I was more in the "no interest for so many months category" and got into a lot of trouble when life changed and I couldn't pay it off by the date. I do like shipo idea to have money in the bank and then charge and be able to pay it off since that is using the credit to your advantage and you would have money on hand to pay it. That's the point I would like to get to in the near future. If there were no plans for us to move and probably have to rent I wouldn't care about a credit score since I just turned 60 and my husband is older than me. There's nothing we really otherwise "need" a credit score for...

[shipo]

Carmella, I have never heard of any benefit to keeping 11% reporting, so I think whom so ever offered that advice is to be considered highly suspect. As for paying before any interest is charged, there are two ways to approach this:

1. Pay the full balance (with the exception of one small balance, say $50 on one card) before the next statement date (which is typically 3+ weeks before the actual due date.
2. Pay the full balance before a due date (which as implied above is typically a little over three weeks from the most recent statement.

Personally I subscribe to option 1 above; with the exception of one card reporting around fifty dollars every month, all of my statements report a balance of $0.00; I've been using this approach for for the last 4+ years and my credit scores hover right around 800.

[Carmella]

Thanks shipo I was going from memory so I am not sure exactly where I heard it or if I misread something. Keeping a balance of $50 would not be too difficult.