Have You Ever Lowered Your Credit Card Limit?

I’m going against the trend here. I have decided that I want to lower our credit card limit. Right now our Discover Card, which is the credit card we use for most of our expenses, has a $2,500 credit line. So far, due to big purchases (contacts + tires for my Honda Civic) our bills have been pretty high >$2,000. I did a quick calculation and realized we have been going over budget by $1,000! My eyes nearly came out of my sockets.

See, I have been noticing quite a psychological dilemma, a trap I thought I was going to be immune to after reading all the horror stories of credit card debt! When we purchase something, instead of thinking we don’t have money to pay for it, I think we have money, there’s a $2500 limit. Sigh, this is really really bad!!!

I was scared of getting a credit card for this very reason. The rewards don’t matter, if we end up spending more money! So, for the next billing period I’m going to ask Discover to decrease our credit limit. I want to go extreme and say $1500 should be our max, but am thinking a limit between $1500 and $2000 (maybe $1750?) will be a good in between limit.

Have you noticed your spending go up when using a credit card?

There are certain positives of having a credit card. Discover has a great portal and offers pretty good rewards for a couple starting out in their financial journey. I like how they add 1 year warranty more to any electronics purchased with the card. We are, also, building up credit, which we will need in the future when we want to purchase a home. But it’s really important to watch your spending. Having a credit line, might make you feel more secure.

I have to say we have been a wee more lenient because we are now earning more. But I want us to avoid lifestyle inflation as much as possible. Here’s a shameless plug.

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10 responses to “Have You Ever Lowered Your Credit Card Limit?

  1. I think research has said that we spend 8-12% more when buying with a credit card versus a debit card and an extra 8-12% over buying with cash. Putting something on the credit card doesn’t seem to have the same sting as when you pay with cash. Very interesting!

    • Yes, I feel I agree with this research. We just switched to a credit card in mid July, and I do feel like we have been spending more. I’m not sure if it’s because we were moving, getting established, etc., but our expenses did increase.

  2. Dan Ariely’s had some interesting insight into credit card usage and how it affects spending in some of his “Irrational” books – I think the one I’m remembering is “The Upside of Irrationality”. Worth reading – but his take-home message is that the further you are from cash in the transaction, the less honest we are (with ourselves about the value, and with others in terms of cheating). Interesting, huh?

    Anyhow – you could also try setting up account alerts to see if that changes things? I think you can set up your Discover card to email you when your balance gets to a certain limit. When you get the email – nothing more on the card. What do you think?

    Reducing your credit limit could have an impact on your credit score – even if it’s something you’ve requested – though I don’t know if you need your credit score for a big purchase anytime soon.

    • We actually don’t need our credit anytime soon. House purchase is about 3 years away (min). We do get emails and alerts, but eh not really working.
      I’m willing to sacrifice a couple points in our credit temporarily for better budgeting.

      The high bill could also be attributed to the extra purchases which accounted to $500+ (contacts and tires in August), but I feel like we should have reigned in our spending and made sure to not spend too much money, and we didn’t. We still kept eating out…

    • That’s a really good idea!!!
      I feel like $2500 for our discover card is high. We have another credit card which is only used for our monthly insurance payment, braces monthly payment, and medical co-pays.That has a $2000 limit.
      So in total we have $4500 in credit limit. That’s a lot. I just don’t want to have that exposure. I think lowering our discover card to $2000 will help us think we have less money available. hmm…

  3. Yes I lowered my credit card limit on a couple cards that I hardly ever use but likely will close soon because I have built up my credit in Canada. I think for the most part we have too many credit cards and too much credit is not always a good thing when you are looking to purchase a car or a home for an example. Lowering a credit card if you find you are spending too much is not a bad idea if that helps you to control your spending. If that was the case and I wanted to pay down debt I would likely hide the card for a bit but make at least one charge on it to show I’ve used it and paid for the bill each year.

  4. Several of my recent college grad friends are using Discover. I feel like I’m bucking the trend by using American Express!

    I support your decision because I think it’s smart to set debt limits, but I was always under the impression that a low debt to available credit ratio was just as important as paying your bills off on time when it comes to credit scores. Susie Orman controversially recommends that young people not be shy about racking up credit card debt in case of emergencies or to help them get ahead.

    My fiance and I are breaking our budget on eating out. Combining our finances has made it easier to justify spending money on more outings together. We definitely need to reign it in, too!

    • Really racking up credit card debt? Well, if I didn’t know better Suzie Orman is working for the credit card companies. I do not believe that young professional should rack up debt in order to get ahead. If we have an emergency, it’s called a savings account.
      How do you like American express? What are the benefits?

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