Reallocation is a wonderful thing when it comes to credit limits. Unfortunately, it has gone the way of the dinosaur in the past few years with credit concerns and awkward consumer protection legislation. It's back and since it is an effective, under-rated credit management tool it is worth 60 seconds of your time.
The ability to reallocate your credit limits varies by credit card company. For years, I didn't have much luck but have done it recently with Citi and Chase, though only after long, painful phone calls. American Express has one-upped them with their new tool that let's you easily move credit card lines between cards online.
What's the advantage? You get a higher limit on your favorite card - allowing you to rack up your preferred points more easily and make larger purchases. Also, if you have a ton of cards like me, you can reallocate from little-used cards that have annual fees and then consider closing them.
Still a little confused?
Here's an example:
Let's say I have three Amex cards, each with a $5,000 limit. I want to close two for some reason, perhaps because, as mentioned, I don't use them and they have annual fees. I'm tempted not to because then I lose $10,000 of available credit on my credit report. Now, I can reduce the credit limit of the two I don't like down to $1,000 and "reallocate" the difference to the one card I want. So now I have $13,000 on one card I like and $1,000 each on two cards I don't. It's much easier to shut those two down or just keep them around if I want. As a bonus, the card I like has much more purchasing power.
Here's what it looks like, before and after:
|Amex 1||Amex 2||Amex 3||Total Credit|
|Original Credit Limits:||$5,000||$5,000||$5,000||$15,000|
For a long time I've had the highest limit on the Amex card I liked the least and lower ones on the others. I just moved $20,000 away from the high limit card onto the one I like the most -- my Amex Starwood. Now I can rack up points and reap the benefits of my much preferred card. Many credit card companies that do allow this require a long, drawn out phone call, so this online tool is great! To start transferring your credit, follow these steps:
- Login to your Amex account
- Click on "recent activity"
- Below your recent charges you'll see the option to "Transfer available credit to another card".
- You can drop the available credit down to $1,000.
Any questions and / or prior reallocation successes? Chime in below in the comments!
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