Comments on: The End Of Credit? http://livingoffdividends.com/2009/03/14/the-end-of-credit/ Join me on my journey to achieve financial independence through dividends, passive income and investments Tue, 13 Dec 2011 07:31:37 -0800 http://wordpress.org/?v=2.8.1 hourly 1 By: Steve http://livingoffdividends.com/2009/03/14/the-end-of-credit/comment-page-1/#comment-104346 Steve Fri, 14 May 2010 15:45:01 +0000 http://livingoffdividends.com/?p=1001#comment-104346 Yes, credit will be drying up. The banks have $30 trillion of derivatives listed as assets on their books that are worth 10% of that amount. They loan out $25 to $60 for every dollar that they have in assets. If they have to write off $27 trillion dollars worth of assets they have to call in 25 to 60 times that amount in loans. Yes the amount of credit contraction that need to happen are staggering numbers. They have to call in loans as it is the law that they can only loan up to that amount. Unused credit limits are considered loans of the full amount of the limit. Therefore the easiest way for them to get some loans off of the books so that they are not breaking banking laws is to reduce unused lines of credit, credit card limits and/or give cash back for closing a credit card account. They have only just started. Yes, credit will be drying up. The banks have $30 trillion of derivatives listed as assets on their books that are worth 10% of that amount. They loan out $25 to $60 for every dollar that they have in assets. If they have to write off $27 trillion dollars worth of assets they have to call in 25 to 60 times that amount in loans. Yes the amount of credit contraction that need to happen are staggering numbers. They have to call in loans as it is the law that they can only loan up to that amount. Unused credit limits are considered loans of the full amount of the limit. Therefore the easiest way for them to get some loans off of the books so that they are not breaking banking laws is to reduce unused lines of credit, credit card limits and/or give cash back for closing a credit card account. They have only just started.

]]> By: Eric http://livingoffdividends.com/2009/03/14/the-end-of-credit/comment-page-1/#comment-58894 Eric Wed, 29 Jul 2009 15:30:39 +0000 http://livingoffdividends.com/?p=1001#comment-58894 The banks are boiling the frog and this short-sighted 'business practice' will blow up in their face just like every other boneheaded decision the credit industry has made in the past ten years. This has nothing to do with risk management, it is a knee-jerk reaction to Congressional oversight of their Ponzi scheme that takes effect in Feb '10. The banks are boiling the frog and this short-sighted ‘business practice’ will blow up in their face just like every other boneheaded decision the credit industry has made in the past ten years. This has nothing to do with risk management, it is a knee-jerk reaction to Congressional oversight of their Ponzi scheme that takes effect in Feb ‘10.

]]> By: MoneyEnergy http://livingoffdividends.com/2009/03/14/the-end-of-credit/comment-page-1/#comment-38944 MoneyEnergy Wed, 18 Mar 2009 03:55:51 +0000 http://livingoffdividends.com/?p=1001#comment-38944 Hey, just linked to your great site again in a new post. Hey, just linked to your great site again in a new post.

]]> By: FFBlog.ca http://livingoffdividends.com/2009/03/14/the-end-of-credit/comment-page-1/#comment-38780 FFBlog.ca Mon, 16 Mar 2009 18:42:33 +0000 http://livingoffdividends.com/?p=1001#comment-38780 Same thing happened to me ... My AMEX credit limit was $10,100 for the longest time until my limit was slashed to $5,000 during January and showed up on my February statement. I don't mind the limit decrease since I didn't use it all anyways... I opened the AMEX card for the 6 month introductory limit of 3% to lower my cost of borrowing in 2008, but didn't manage to pay it off in the 6 months as I had anticipated. I'm much smarter now with my credit and borrowing than I was in 2007. My biggest issue was the effect on my ratio: I went from 47.52% ($4800/10100) to 88% ($4400/5000) within a month. I'm now at 80% ($4000/5000) and hoping to get to 60% by the end of the month ($3000/5000). Same thing happened to me … My AMEX credit limit was $10,100 for the longest time until my limit was slashed to $5,000 during January and showed up on my February statement. I don’t mind the limit decrease since I didn’t use it all anyways… I opened the AMEX card for the 6 month introductory limit of 3% to lower my cost of borrowing in 2008, but didn’t manage to pay it off in the 6 months as I had anticipated. I’m much smarter now with my credit and borrowing than I was in 2007.

My biggest issue was the effect on my ratio:
I went from 47.52% ($4800/10100) to 88% ($4400/5000) within a month. I’m now at 80% ($4000/5000) and hoping to get to 60% by the end of the month ($3000/5000).

]]> By: Donnie http://livingoffdividends.com/2009/03/14/the-end-of-credit/comment-page-1/#comment-38701 Donnie Mon, 16 Mar 2009 03:12:17 +0000 http://livingoffdividends.com/?p=1001#comment-38701 I have an Amex card and a few years ago I had a credit limit of around $2000. I used a promotion (2.9% APR) to pay for tuition, and they slowly lowered the limit - every couple a months I'd get a letter telling me that my limit was a couple $100 lower (just above my balance). It sits today (paid off) at $700. I have two discover cards (pay them off each month) and the credit limits on those just keep going up and up. The 2nd account was opened last year (to take advantage of a promotion) and I started with a $5k limit, then they upped it to $7k, and now it's at $10k. That might be a better alternative than Amex for you. You can usually find a promotion where they'll give you $100 if you spend $500 in the first couple of months. I also have a couple cards through Bank of America and Chase, and they've never reduced my limits, either. Amex has been the only one. For the previous poster, before you try to get your credit limit reduced, take into account that it could negatively impact your credit score. For example, Having $2k in credit card balances with a limit of $10k will give you a lot better score than having $2k with a $3k limit. Of course, if you're doing it so that you are not able to get that far in debt, than that's a different story. I have an Amex card and a few years ago I had a credit limit of around $2000. I used a promotion (2.9% APR) to pay for tuition, and they slowly lowered the limit – every couple a months I’d get a letter telling me that my limit was a couple $100 lower (just above my balance). It sits today (paid off) at $700.

I have two discover cards (pay them off each month) and the credit limits on those just keep going up and up. The 2nd account was opened last year (to take advantage of a promotion) and I started with a $5k limit, then they upped it to $7k, and now it’s at $10k.

That might be a better alternative than Amex for you. You can usually find a promotion where they’ll give you $100 if you spend $500 in the first couple of months.

I also have a couple cards through Bank of America and Chase, and they’ve never reduced my limits, either. Amex has been the only one.

For the previous poster, before you try to get your credit limit reduced, take into account that it could negatively impact your credit score. For example, Having $2k in credit card balances with a limit of $10k will give you a lot better score than having $2k with a $3k limit. Of course, if you’re doing it so that you are not able to get that far in debt, than that’s a different story.

]]>