How Long Can You Live On Your Credit Cards?

It’s old news that credit card companies are cutting people’s credit limits. I also read on FatWallet some banks paid people more than $500 for paying down their balance. I checked my three cards. None of them cut my limits. Maybe they just haven’t got to me yet. Besides merchant fees, they are not getting any other revenue from me. I guess they are still OK with that. Every month I use about 5% of my available limits among three cards. If they want to reduce my credit limit, go ahead. I think the limits are too high to begin with. I like the questions reader Pelon asked in the comments to a previous post:

“What is a healthy borrowing level for the economy? What were we at before the credit market started to freeze-up? Where are we now? Are we trying to prop up something that is unsustainable or trying to get the market back up to a healthy level?”

So I’d like to ask, how long can you live on your credit cards? In other words, what is the ratio of your combined credit limits on all your credit cards to your monthly expenses? Mine is about six months of expenses. That means I can live on my credit cards for six months if I don’t get a single penny of income. I think that’s very generous on an unsecured basis. What about you? Do you think your credit limits are too high?

See All Your Accounts In One Place

Track your net worth, asset allocation, and portfolio performance with free financial tools from Personal Capital.

Comments

  1. Pablo says

    I could live on credit cards, alone (assuming zero income from any other source) for roughly 37 months (not a typo). I have three cards (with fairly high lines of credit), and low monthly expenses.

  2. anonymous says

    Total credit card limits is somewhere North of $150K. Monthly expenses are about $2K. Could live for more than 6 years on credit alone.

    I did have a credit card cut my limit recently. It was a card that I’d opened for arbitrage purposes, and have never used. The limit was cut from $25,000 to $500.

  3. Harry Sit says

    Six years! They are very trusting, aren’t they? I thought they were already generous in giving me six months.

  4. Pelon says

    I think my limits are way too high. I could probably go 12-18 months on my available balances, and I only have two cards. If I hadn’t closed a separate card a few years ago, I could probably go 24-30 months. The only time I could ever conceive of getting even close to my limit is if I was in REAL financial trouble.

    I haven’t had a balance cut, but they did change the way they calculated the minimum interest rate. The old formula was prime + 1.75%. They’ve since change it so that the rate doesn’t go below 7.75%. I would guess this is in response to a variety of issues including concerns about overall credit quality, the inability to make money at such a low rate, and the new credit card rules.

    It drives me crazy that Congress, Treasury, the President, and the Fed all seem obsessed with “getting things back to normal”. What if now is normal and before was abnormal? They don’t want to discuss that possiblity. We would all like housing, employment, and asset prices to go back to where they were, but if that was an unreasonable state, the government’s efforts are useless at best.

  5. Ted Valentine says

    Interesting question.

    I have an equity line (came with a credit card!), so I’ll count that.

    Lessee — I’m gonna say 37 months. 17 without the equity line.

    That seems like too much. I should do something about that.

    This assumes I make no payments and no interest accrues, which is false. So it would be less.

  6. James says

    ah, but has anyone consider CORBRA (or some kind of health insurance) as part of their monthly expense? Having to face that reality recently make me realize that my monthly expense is not as low as I believe. Last time I check it is well over $1000 / month for a family.

  7. James says

    Also, recently I called one of my credit card company to reduce the credit limit (yes, got hit with credit card fraud too). They would NOT reduce, giving me some kind of lame excuse. I guess they are not scared yet. It is Capital one with cash rewards.

  8. Jeff says

    I have one credit card. I think I can go about two months on my credit limit. My credit limit is quite paltry: in a year I put 3-4x my credit limit on it. Yes, I always pay my balance. I don’t know why they haven’t kicked me out, they can’t possibly be profiting from me. (Or I should say, “Woohoo! Debt-ridden individuals who pay the minimum payment are subsidizing me!”)

  9. Sheena says

    First let me say I love this site. I’m a recent graduate, battling with student loans and high credit card balances. All together with my three credit cards at there highest available credit, I have 20k….. I’m half that in debt. So 10k to work with, monthly expenses roughly $2,000. Guess I could make it for five months. (Maybe)

Leave a Reply

Your email address will not be published. Required fields are marked *