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Credit issuers, particularly unsecured credit card issuers, have been calling back lines every time there's even a whiff of an economic downturn since time imme

Credit issuers, particularly unsecured credit card issuers, have been calling back lines every time there's even a whiff of an economic downturn since time immemorial. Those who "play the credit card game" have learned, usually through burned hands, to anticipate this. There's no such thing as a reliable limit through a big issuer. This is doubly true if someone has been chasing CLIs through "luv" (getting credit limit increases by clicking the "request limit increase" button on issuer web sites, often called the "luv button"). The only reliably stable limits are through small issuers who have much tighter rules and a much less intricate risk model. Also, on this: > other class of borrowers who had opened credit lines, planning ahead, to tap into exactly during such times will now be left without access to that what they had planned for in the past. > This now puts a short squeeze on people who could plow through these hard times and puts them at risk All I can say is absolutely do not rely on credit being there as a backstop. That's what cash savings are for. Yes, it's easy for me to say "just save six months of expenses!" and I'm not trying to call you wrong, so much as get a head start on the next class in the School of Hard Economic Knocks. The only people who can rely on credit being there are people like that ex-Amazon engineer whose tweet I've been seeing passed around these past couple of weeks. He pulled $250k out of a HELOC on some investment property in Seattle he's been trying to sell, "just to have the cash." He likely already has so much cash or short-term equivalents to his name, that added $250k is less out of need and more out of strategy. That class of investor will always have credit available; most of the rest of us will see it pulled at the worst possible time.

subhobroto 6y ago
The amount of insight and knowledge in your comment is so dense that my single upvote does not do it justice. My thoughts: > Credit issuers, particularly unsecured credit card issuers, have been calling back lines every time there's even a whiff of an economic downturn since time immemorial I have an aggregate mid six figure credit line excluding mortgages. Have been through this and the last two recessions. Never had a $1 drop in CL: I choose who I build realtionships with very closely. Infact, I have had CLIs happen during "good times", without me reaching out . One lender even did a CLI without even notifying me (they usually email or mail you "good news!") - the only reason I noticed is because I like to look at my statements manually every billing period. There is no Bank of America, Citibank or any of that retail nonsense in my basket of credit mix. Majority of them are in geographically diversified credit unions Finance 101. > absolutely do not rely on credit being there as a backstop. That's what cash savings are for cash is an asset class but it's extremely expensive and a liability for me. cash causes me headaches. Even with my 3% APY bank accounts (people seem to believe there are none of them in the US which is untrue!) after effort and inflation, I barely break even. I have to track it, protect it try and ensure it does not loose value too much. I have to visit local branches when I need to take it out or deposit it. Credit is awesome. In the U.S., it's really cheap and consumer lines of credit have extremely strong protections. I purchased a $500 phone from Best Buy because they had a special promotion that required me to purchase their gift cards. They would not allow me to purchase gift cards using my premier credit card, so I used cash. A year later, the phone died. I had 0 recourse. Had I purchased it with my Amex, all I would have to pay is a $50 processing fee, if at that. I would, at worst, get refunded by Amex, the fair value of the phone at that time. In my few interactions with Amex, I wouldn't be surprised if they just credited me $500.
- techsupporter 6y ago
  Thank you for the compliment; I just pontificate on forums. > There is no Bank of America, Citibank or any of that retail nonsense in my basket of credit mix. Majority of them are in geographically diversified credit unions You have already figured out what I meant by issuers with different risk profiles, so you're ahead in the credit "game" for sure. My largest credit lines are also with credit unions and they've not fluctuated once through three economic dips. That's not so much bragging--I'll never achieve a six-figure CL with any of them--as it is a data point. The large issuers have their purposes and I have credit lines through them, just not the ones I use for more long-term planning. As for this: > cash causes me headaches. Even with my 3% APY bank accounts (people seem to believe there are none of them in the US which is untrue!) after effort and inflation, I barely break even. > I have to track it, protect it try and ensure it does not loose value too much. I have to visit local branches when I need to take it out or deposit it. I think you are conflating cash as an investment and cash as an asset. You're right that it comes with a cost, but with that cost you (in currencies like EUR, JPY, and USD) are buying stability. Cash absolutely is not a viable growth investment but diversification means you have a stable block of cash on which you can fall back. The emergency fund is not an investment; the most risk it should ever see are perhaps well-insured municipal/state government bonds. I have my emergency fund parked in two different online savings accounts paying about 2% interest each. Yes, I wind up behind relative to inflation over a long enough period of time but it's worth it to me to know that money will always be there and immediately accessible. (Also, for what it's worth, moving money electronically in the States has gotten easier. I have set up two of my credit union credit cards as bill pay destinations on both of my emergency fund savings accounts. If I need to use the emergency fund, I simply put the charge on a credit card and pay it from the emergency fund account instead of my regular account. No branches involved.) > Credit is awesome. In the U.S., it's really cheap and consumer lines of credit have extremely strong protections. This is true, but that's not what I mean when I talk about emergency funds and that's not what I thought you were getting at when you referred to the reducing of credit lines for people who thought they were getting them to plan ahead and use in lean times. Credit is a tool, one with a somewhat slimy handle, but it's not a good tool in an economic downturn because that's when it will break the fastest. I have a handful of 0% credit lines in use at the moment for just this reason; if they're going to give me money to use for free on something I'd have done anyway, I'm damn sure going to use it. I also have money to pay them off in short order squirreled away just in case I need to extinguish that debt in a hurry.

subhobroto 6y ago

The amount of insight and knowledge in your comment is so dense that my single upvote does not do it justice. My thoughts: > Credit issuers, particularly unsecured credit card issuers, have been calling back lines every time there's even a whiff of an economic downturn since time immemorial I have an aggregate mid six figure credit line excluding mortgages. Have been through this and the last two recessions. Never had a $1 drop in CL: I choose who I build realtionships with very closely. Infact, I have had CLIs happen during "good times", without me reaching out . One lender even did a CLI without even notifying me (they usually email or mail you "good news!") - the only reason I noticed is because I like to look at my statements manually every billing period. There is no Bank of America, Citibank or any of that retail nonsense in my basket of credit mix. Majority of them are in geographically diversified credit unions Finance 101. > absolutely do not rely on credit being there as a backstop. That's what cash savings are for cash is an asset class but it's extremely expensive and a liability for me. cash causes me headaches. Even with my 3% APY bank accounts (people seem to believe there are none of them in the US which is untrue!) after effort and inflation, I barely break even. I have to track it, protect it try and ensure it does not loose value too much. I have to visit local branches when I need to take it out or deposit it. Credit is awesome. In the U.S., it's really cheap and consumer lines of credit have extremely strong protections. I purchased a $500 phone from Best Buy because they had a special promotion that required me to purchase their gift cards. They would not allow me to purchase gift cards using my premier credit card, so I used cash. A year later, the phone died. I had 0 recourse. Had I purchased it with my Amex, all I would have to pay is a $50 processing fee, if at that. I would, at worst, get refunded by Amex, the fair value of the phone at that time. In my few interactions with Amex, I wouldn't be surprised if they just credited me $500.

techsupporter 6y ago
Thank you for the compliment; I just pontificate on forums. > There is no Bank of America, Citibank or any of that retail nonsense in my basket of credit mix. Majority of them are in geographically diversified credit unions You have already figured out what I meant by issuers with different risk profiles, so you're ahead in the credit "game" for sure. My largest credit lines are also with credit unions and they've not fluctuated once through three economic dips. That's not so much bragging--I'll never achieve a six-figure CL with any of them--as it is a data point. The large issuers have their purposes and I have credit lines through them, just not the ones I use for more long-term planning. As for this: > cash causes me headaches. Even with my 3% APY bank accounts (people seem to believe there are none of them in the US which is untrue!) after effort and inflation, I barely break even. > I have to track it, protect it try and ensure it does not loose value too much. I have to visit local branches when I need to take it out or deposit it. I think you are conflating cash as an investment and cash as an asset. You're right that it comes with a cost, but with that cost you (in currencies like EUR, JPY, and USD) are buying stability. Cash absolutely is not a viable growth investment but diversification means you have a stable block of cash on which you can fall back. The emergency fund is not an investment; the most risk it should ever see are perhaps well-insured municipal/state government bonds. I have my emergency fund parked in two different online savings accounts paying about 2% interest each. Yes, I wind up behind relative to inflation over a long enough period of time but it's worth it to me to know that money will always be there and immediately accessible. (Also, for what it's worth, moving money electronically in the States has gotten easier. I have set up two of my credit union credit cards as bill pay destinations on both of my emergency fund savings accounts. If I need to use the emergency fund, I simply put the charge on a credit card and pay it from the emergency fund account instead of my regular account. No branches involved.) > Credit is awesome. In the U.S., it's really cheap and consumer lines of credit have extremely strong protections. This is true, but that's not what I mean when I talk about emergency funds and that's not what I thought you were getting at when you referred to the reducing of credit lines for people who thought they were getting them to plan ahead and use in lean times. Credit is a tool, one with a somewhat slimy handle, but it's not a good tool in an economic downturn because that's when it will break the fastest. I have a handful of 0% credit lines in use at the moment for just this reason; if they're going to give me money to use for free on something I'd have done anyway, I'm damn sure going to use it. I also have money to pay them off in short order squirreled away just in case I need to extinguish that debt in a hurry.