Credit card and limit - alot less than usual? (pay, million, taxes)

[firehawk]

So, I am new to this in the US and frankly never been in this situation.

I have around 3 credit cards, 2 of which i use but make full payments on them when due.*

I have never had loans or been in debt - have always made payments on time or, in this case, more than the minimum payment every month.



I have my own business and pay yearly taxes to IRS. The amount of taxes are high so naturally I applied for an AMEX 0% interest (for 15 months I think) blue plus card and paid the IRS using that and then I make monthly payments to the card.

The following year I did the same, but paying off both cards at the same time. The first one, I just finished paying off. The first card I got 3 years ago.



Same situation again this year. Except I applied for the card and found my credit limit is 2K! On my other cards, it is 20K (twenty).

I also applied for a personal card from AMEX too (one of the airlines) and was surprised the credit limit was 4K as usually I get a high credit limit and always pay on time etc...



am I confused and at a loss on why this has happened and what to do?

my score is 720 (it used to be higher and have had a couple of hard inquiries in the last year).



Is it better to close the cards I am not using? or keep them open?

How best can I get out of this situation since I do need as much credit as I can get (of course, being responsible!) in order to continue to pay IRS taxes in full but put it on the credit card(s) in future with the 0% interest options. I also, needless to say, want to make sure that for my personal credit and future applications for whatever, is good and is not compromised because of this.



Does opening a new account every year increase the chance of lowering the credit limit? How can I increase it (without requesting for increase) by default or get a higher limit by default?*

What about increasing the credit score quickly?



Again - never had late payments. AMEX had 1 issue a few months ago where auto pay got disabled/turned off and they called me. They confirmed and also waived the late payment fee and I paid more than the amount due and everything has been in good standing so I shouldn't be penalized for a mistake on their end. I found out that the 2nd card I applied for, last year, had its 0% offer reseeded because of this, and didn't know until I called up today to ask a few questions in the new card I received and its credit limit.



Any help and advice is appreciated. I am actually panicking and freaking out. I have never had this issue before and I am learning. In the UK, where I am from, my credit rating is excellent.

Again, never had any late payments or missed any payments so I am puzzled by this and clearly missing something.



Thank you

[GeoffD]

Originally Posted by firehawk

I have my own business

That's all anyone needs to know. What percent of small businesses just got vaporized? Half? More than half? In the last 30 days, it became much harder to get unsecured credit since the risk is so much higher.

[beachmouse]

American Express' credit limit algorithms will tend to do something like say 'given information received, we will generally easily approve for a total credit limit of X across all cards' Once you reach that limit, they'll start offering lower limit cards. On the personal card side, they'll let you move that total credit limit among the cards. So if you started out with an Everyday card with a 20K limit, and then got the Skymiles card with a 4K limit, you can go online and reallocate it so it's 12K on the Everyday card and 12K on the Skymiles card. Which is useful when you want to use specific cards for specific charges or tweak the credit utilization percentages that get reported to credit bureaus.

[Arya Stark]

Originally Posted by beachmouse

American Express' credit limit algorithms will tend to do something like say 'given information received, we will generally easily approve for a total credit limit of X across all cards' Once you reach that limit, they'll start offering lower limit cards. On the personal card side, they'll let you move that total credit limit among the cards. So if you started out with an Everyday card with a 20K limit, and then got the Skymiles card with a 4K limit, you can go online and reallocate it so it's 12K on the Everyday card and 12K on the Skymiles card. Which is useful when you want to use specific cards for specific charges or tweak the credit utilization percentages that get reported to credit bureaus.

This happened to me. I have about 90K on several cards in credit. Then I applied for a new one and got a credit limit of 5K. That annoyed me because I was going to use that card for a 0% offer.

I ended up using credit from my other cards for that card and all was well.

But it annoys me that credit companies have this kind of power to limit the amount of credit you can get.

[galaxyhi]

If you just applied for/got the $2&$4k cards, during the current virus situation, it may simply be because credit is tightened now.

I mean in the lady 2 weeks 10million people have applied for unemployment. Some/many of those jobs may not come back.

Banks are scrambling to help people in a bind over corona virus decreases or loss of income, but ultimately they want their money.

Some credit limits have been lowered, regardless of credit standing.

You have 2 or so options.

1) you can close the cards with low limits. BUT, that will decrease your"available credit" and increase your "credit utilization". If you have a $20k card and routinely charge, say, $18k a month, your credit utilization is HIGH. EVEN IF you pay it off every month. They don't know for sure you will pay it off until you do. Therefore your "available credit" is almost all used up each month. Having the extra $6k in unused "available credit" will help decrease your "credit utilization". This will overall change your "debt to available credit" ratio, and thusly make your credit score go up.
In other words, you AREN'T using ALL your available credit line.
Lets say you have only ONE CC ( Credit Card) that has $1k on it. And you charge $900 on it. Your "credit utilization" is 90%, and will lower your Credit score.
If, however you only charge$100 on that card, your "credit utilization" is only 10%, and your credit score will go up, because you aren't using up all your available credit.
*It still matters not if you pay it off every month.

2) you can keep the lower limit cards to add to your "available credit".
As noted above, if you have 1 $20k card, and one $24k and one $4k card and one $2k card ( $50k in total"available credit"), and you have charged a total of $25k on any combination of those cards, your"credit utilization is 50%. If you delete the $2&$4k cards you will only have $44k in "available credit", and your "credit utilization" is now higher than 50%, and hour score will go down because you are using more of your "available credit".

Some of the credit score metrics recently changed in how they calculate your credit score, but it still remains that the more if your "available credit" you use, the lower your score will be.

And it still matters not if you pay it all off each month or if you make payments for years on the balance.

3) you can KEEP the low credit cards, and if you show responsible use/payment history, you can always ask for a credit limit increase, or they may automatically give you an increase each year of responsible use/payment history.

If I were you, I'd keep the $2&$4k cards to increase the " available credit" line. And I'd use them occasionally to keep them active, and pay them off monthly, and later ask for a credit line increase. You could ask after a year for the $2k card limit to be increased to $5k, and the $4k card to be increased to $10k, making you feel better about your lines of credit with them.

If the corona virus mess we are in continues with an indefinite ending, or a resurgence come next winter, credit lines will continue to be tight.

And, as you noted, the more hard pulls you have, the more dings you have against your score. So for a boost, refrain from applying for more credit for a while.
The increase in credit limit to the low cards may or may not come with a hard pull, they may do a hard pull just to check, or they may not and go off your usage/payment history with them, so no need to do a hard pull.
If you ask for a credit limit increase in a year, ask if they can do it with no pull, or only a "soft pull", which won't ding your credit score.

Best of luck to you in sorting out and learning our credit system here in the US, and WELCOME!

[Threestep2]

Originally Posted by Arya Stark

This happened to me. I have about 90K on several cards in credit. Then I applied for a new one and got a credit limit of 5K. That annoyed me because I was going to use that card for a 0% offer.

I ended up using credit from my other cards for that card and all was well.

But it annoys me that credit companies have this kind of power to limit the amount of credit you can get.

Then your available credit did not cover over the k which were extended to you.

[firehawk]

Thanks all.
I found that you can transfer available credit between your AMEX cards (business only or personal only) and was able to do this for the business card. This helps in my immediate situation.
1 of my AMEX cards had like 1K left, so I paid that off. The credit I had on this was 20K
The other AMEX card has 10K left to pay, but paying that off monthly. I think the Credit I had on this was also 20K

I guess credit utilization is a problem in my instance?

I am just concerned about next year when I need to have another credit card from AMEX due to the 0% interest offer for 15 months that I may not get a high credit line. The advantage for me is not only the good perks going with AMEX but because I have been a card holder for a long time with them, they dont need to do a hard inquiry.

[oneasterisk]

Doesn't the IRS charge a fee to pay your tax bill on a credit card? Is this the best avenue to pay your taxes annually? Not a business owner so don't know the ins and outs, just honestly curious.

[firehawk]

The fee is far less than making installment payments to IRS with interest per month! It's only like 2.5% or something when paying by credit card.

[Grlzrl]

Originally Posted by Arya Stark

This happened to me. I have about 90K on several cards in credit. Then I applied for a new one and got a credit limit of 5K. That annoyed me because I was going to use that card for a 0% offer.

I ended up using credit from my other cards for that card and all was well.

But it annoys me that credit companies have this kind of power to limit the amount of credit you can get.

It this a serious statement?