Credit limit high or normal? Should I reduce?

newlease

I have 2 credit cards, both with 12k limits, from Lloyds and Halifax. I have been banking with the Lloyds group for nearly 20 years now since childhood, been a good customer never in debt/overdraft, in full time employment earning 60k.

12k is a much higher limit than I was expecting or need overall let alone per card, is this a typical value for someone with my specifics or unusually generous?

I do need both cards due to their different benefits but do not need anywhere near 2 x 12k. 2 x 3k would be sufficient. Is it worth asking for a reduction in the limits or can this have negative consequences and best to leave alone? Reason I ask is I am planning on getting a mortgage of around 150k, would my credit limits make a major difference to my mortgage application or is it not too relevant in my case?

chattychappy

Personally I wouldn't worry. I have a number of cards with high limits and it doesn't stop me getting new cards. I only use about 5% to 10% of my available credit. I suppose there is an argument for cancelling unused cards so you can get new customer offers and cancelling/reducing limits to reduce the scope for fraud.

By the way, I never consider it "generous" when a CC gives me a high limit. It is just an opportunity to borrow. I am the generous one if I: 1) shop using their card so they get commissions and 2) pay their interest rates!

MABLE

newlease wrote: »

I have 2 credit cards, both with 12k limits, from Lloyds and Halifax. I have been banking with the Lloyds group for nearly 20 years now since childhood, been a good customer never in debt/overdraft, in full time employment earning 60k.

A good customer in Lloyds eyes is the one who does use their overdraft.

A4445

Do credit card companies make much money out of customers that don't pay any interest?

bigadaj

A4445 wrote: »

Do credit card companies make much money out of customers that don't pay any interest?

There's Obviously the merchant fees, and the opportunity to cross sell other products such as loans and mortgages.

The number of 0% deals available, and the fact you'd expect the majority of people using these to be borrowing money longer term at no cost it's suggests that normal accounts are valuable, or at least perceived to be, to the providers.

YorkshireBoy

A4445 wrote: »

Do credit card companies make much money out of customers that don't pay any interest?

Somewhere between 5% and 8% (on the actual indebtedness, rather than credit limit), depending on when/how they make their payments.

newlease

Interesting. I was expecting more recommendations to reduce. Is 12k not seen as a high limit?

YorkshireBoy

newlease wrote: »

Interesting. I was expecting more recommendations to reduce. Is 12k not seen as a high limit?

It's been a while since I applied for/switched a mortgage, but back then all the lenders were concerned about was what you had spent, not what you could spend.

BTW, ref your earlier question...on your salary and relationship with LBG, a £12K limit with those providers would not be considered high. My salary isn't as high as yours, and my relationship with both is a good bit less than 20 years, yet I currently have a larger limit with Halifax (BoS) and have previously had larger limits with Lloyds (2 at the same time!).

TheShape

newlease wrote: »

Interesting. I was expecting more recommendations to reduce. Is 12k not seen as a high limit?

Not with a £60k income, it's only 20% of your income. My largest limit is £8k or approx 30% of my £27k income.

My total credit limits are approx £39k so your total £24k is not very high at all.

newlease

I see it is not considered high which is good but to put into perspective and perhaps correct a few statements each 12k is "only 20%" of my gross income. It is 30% of my net income and about 80% of my income after essentials (rent, basic bills and food).

Interesting to know mortgage lenders looks at spend not limit. I always thought it was credit exposure. By this logic, what happens if credit spend profile changes drastically ie goes up after a mortgage is taken. This also makes me question whether I should bother having an emergency saving pot if I could just use my credit cards instead.

phillw

newlease wrote: »

Interesting to know mortgage lenders looks at spend not limit. I always thought it was credit exposure.

The mortgage affordability checks essentially changed everything. Keeping or cancelling a high credit limit card seems to make no difference.

newlease wrote: »

This also makes me question whether I should bother having an emergency saving pot if I could just use my credit cards instead.

It depends on interest rate, your view on risk etc. It's quite easy to have small amount of savings earning more than you're paying to borrow that money on your mortgage. It's therefore worth keeping savings as long as you can afford to and it doesn't push your LTV to another band of higher interest rates that negate the difference.

Especially if your emergency is then forcing you to borrow at 20% rather than the difference between your savings and your mortgage rates.