$300 Richer…Or Not…It Depends On How You Look At It
I received a letter in the mail from one of my credit cards that told me I was eligible for few upgrades. I immediately called the number to see what they were offering.
I was told that I could get one of the following options:
- 3 points per dollar for every dollar spent
- $300 credit limit increase
- 0% balance transfers until July 2009.
I opted to take the $300 cash increase and I will explain why below. I have not been using this card for purchases because I get 5% cash back with another card already. Getting 3% would not benefit me in any way because I am already at a higher cash back award with another card.
I also decided against getting the balance transfer because I have already used this particular card for balance transfers in the past. I only have about $350 available credit left on this card so it would not make sense for me to get a balance transfer (which includes fees) on that small amount.
I took the credit limit increase because this is the one that will benefit me the most in the future. I can always use a higher credit limit on this card because it is one of my longest standing cards so it has a great credit history on it.
Now I do not plan to use the extra credit for purchases because that will just bring my utilization ratio to an uglier number. Instead I am using the ‘extra’ $300 as a cushion that lowers the rate of utilization on that card. I am paying off the current balance transfer that I did on that particular card and it is just nice to have that money.
So should I regard that $300 as income for the month? Can I now say I am $300 richer….or do I just have the potential to get $300 deeper into debt?
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17 Responses to “$300 Richer…Or Not…It Depends On How You Look At It”
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[...] Am I $300 Richer? – LuluGal explains how she recently got a $300 credit limit increase to reduce here utilization rate. This is an important concept if you’re trying to maximize your credit score. Of course, my conclusion is that LuluGal is NOT $300 richer… although she has the potential to become $300 poorer if she’s not careful. [...]
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[...] How I Save Money presented $300 Richer…Or Not…It Depends On How You Look At It [...]
What card are you getting 5% on?
Best Wishes,
D4L
I would never think of a card as money! It is just the potential to go deeper in debt…although I’m guessing $300 isn’t going to make or break anyone. That said, I would have done the same thing just to reduce my overall utilization!
I’ve always not been sure about Credit Cards. i think they can be a great tool for making purchases and a way to build good credit, but it has its pitfalls as well. Thanks for your post, it was insightful.
Ryan Thorson
http://hackalife.com
@ D4L
I am getting the 5% on Discover. They have a rewards program where every three months you get 5% on certain items. Right now it is gas and groceries and that is where all my money is going anyway.
@ Twiggers
In my younger days I would have said that I was $300 richer…but now that I am wiser I see it as the potential to get into more trouble.
@ Ryan
Glad you enjoyed the post. You have to be really careful with credit cards because the card companies will use ANY excuse to jack up your rates.
I wouldn’t say richer or more potential for debt. I would consider it as a lower debt to limit percent!
Definitely $300 deeper in debt. But it is good for your credit score the lower the percent of your balance you carry over. So the extra $300 is good in the event of an emergency, and for your credit.
I really like the 3 points for every dollar. If you spend like 15k a year, you would get 45k in points. Depending on the program it would make it very easy to get free tickets and other gadgets.
@ NoBrainerDeals
Yes the 3 points per dollar spent would be nice…but since I already have a card that gives me 3% cash back, with 5% on things like gas..this would not be the best deal for me.
Also, I am not interested in getting free tickets and items right now….I prefer the cash back which I can use to pay off other debts.
Are you still happy with your decision to go with the card with the $300 limit increase?
@ Myers Briggs
I just got the increase so it is too early to tell the effects..but I am happy with the choice I made.
I agreed with Twiggers comment until the last sentence lol.
Can you explain the ‘overall utilization’? I don’t think I’ve ever heard that term and don’t really understand it.
It kind of sounds like a way to trick one’s self into thinking you are in less debt, by having more available credit?
@ Shawn
Utilization is simply the ratio of the level of debt you have to the amount of available credit.
If you have one card with $100 credit limit but you carry a balance of $50 then your utilization is 50%. This is high!
If you have a card with a $500 limit and carry a balance of $100 then your utilization is 20%. This is good.
The credit bureaus use this to help determine your credit score so that is why a lot of pf bloggers talk about it.
It is not a way for me to trick myself into thinking I have less debt….I am not THAT crazy. It is simply based on a formula that the credit bureaus use.
This is why your credit score drops when you take a balance transfer. Even though it might be at 0% and be great deal, all the bureau sees is that the amount used to the available balance is high.
I took the credit limit increase to help my utilization because I have a 0% balance transfer that I did on that card which made my utilization high.
Hrm, so its for the credit bureaus to trick themselves into thinking you have less debt accumulated? LOL
I get your point but it just seems silly. A person still owes the same amount, regardless of the upper end credit limit. I don’t see how it helps anything other than that silly credit score hehe
You’re definitely not $300 richer. But you do have the potential to become $300+ poorer than you already are. At least that’s how I see it.
ALL HAIL THE ALMIGHTY FICO SCORE!!!
“To your knees peasants!” – FICO
@ Striker
LOL!