I am curious about the tactics that someone would use if they wanted to obtain the maximum possible total credit limit. I don't actually intent to do this, but I'm just curious about how much money someone could make via arbitrage. For example, would it make sense to lower the limits on your credit cards so that you could obtain more, then raise the limits again? Does applying for credit cards all at once still work, or have they updated their systems to be able to realise when someone is doing this? Are there any other tricks that could work?
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1In the US, at least, if you charge a lot e.g. up to close to your credit limit, for two or three months in a row and pay it off in full each month, your credt card company will raise your credit limit all by itself to prevent you from accepting an offer from a competing credit card company and taking your business away from them.– Dilip SarwateMar 17, 2012 at 12:37
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Where does the "make money via arbitrage" come in to this? $10K or $10 million, cards with 10% rates aren't making you any money.– JTP - Apologise to Monica ♦Mar 18, 2012 at 1:11
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@JoeTaxpayer: investopedia.com/articles/pf/09/credit-card-arbitrage.asp– CasebashMar 18, 2012 at 1:16
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Got it. What's missing is (a) the fact that the risk free rate is near zero, so the chance to borrow say $10,000 and earn $500 over a year is over. If you have some high interest debt on a card or short term loan, this can help. (b) the cash available is often a fraction of the total line. I have one card with $50k limit, but can only pull $10k as an advance. Sorry, I hadn't heard this called arbitrage, appreciate the link.– JTP - Apologise to Monica ♦Mar 18, 2012 at 2:32
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Also, in the time since that investopedia article was published, it has become almost impossible to find balance transfers that that do not have a 3% fee.– Scott McIntyreMar 19, 2012 at 14:51
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1 Answer
If you lower your limits, you could also lower your score. Lowering your limits will raise your utilization rate.
But if you did try it, your gain might only be temporary. They could decide to lower your limits if they discovered you have more cards than they realized.
You are expecting perfect knowledge, so that a new card realizes you can handle more credit. But you are also counting on imperfect knowledge, so that they won't notice when you raise the limits on all your cards.
answered Mar 17, 2012 at 14:38
