I’ve been hearing more and more about credit card companies lowering limites or even cancelling credit cards that are not used.  I only use two credit cards so at first I didn’t think that it mattered much to me.  I have three unused cards that I’ve kept just because I figured it wasn’t hurting anything, and would be there in the unlikely event that I need them.  But after reading some of the articles discussing this change, I realized that cancelling credit cards can negatively affect my credit score.

As I mentioned, I use two credit cards. One is an American Express Gold Card on which we put all of our personal expenses. It get’s paid off every month, so it offers an easy way for me to manage my spending, something that we’ve been working harder on lately, and it gives me about 1% back in the form of rewards, which I typically cash in to use at Home Depot.   My other credit card is an American Express Blue Card which I use to purchase inventory for an online business. It has a high limit of $35,000 and lately I have carried a balance on it that is very close to the limit.  (It’s also the card that Amex lowered my interest rate from 10.99% to 6.99% on.)  The other four unused cards have credit limits of $13200, $9600, $7400, and $6000.

So what does this mean to my credit score?  Well, to begin with, the fact that I keep such a high balance on my Blue Card means that my balance to limit ratio on that card is very high… 90%+ most months.  That has a negative impact, and I’ve often considered moving part of the balance to other cards just to even things out a bit.  The overhead of managing multiple cards though has always outweighed the perceived benefit.  Plus, I don’t plan to need credit in the near term.  Now though, I wonder if I may be at risk for losing those other cards if i don’t use them. . . I also wonder whether I care.

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My wife and I have been blessed in many ways… we have two beautiful girls, a wonderful church family, a nice house, and both of us have good careers with little perceived risk of layoff.  That being said, we also got comfortable.  Comfortable that we could spend on whatever we wanted without planning and comfortable enough that for a long while we quit paying attention to the details in our finances.

Then the market crashed, and the economy soured and we decided to take a fresh look at everything. The funny part is that I really haven’t been impacted much by the troubled economy… my paycheck hasn’t gone down, my bills haven’t gone up (in fact my HELOC rate is tied to the feds rate, so it’s been going down), and I haven’t needed a loan.  The only place I’ve really been hit hard is in my investments which is plenty bad, but which doesn’t directly impact my monthly budget.

Regardless, it was the straw that broke the camels back, and we realized that in many ways we have been living recklessly as it relates to our finances; taking too much for granted, and not being as responsible as we should be with what we have been given.  We haven’t been very good stewards.  That’s part of the reason I started this site, because we wanted to capture the journey to improve and share what we learn with others.

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Today proved more interesting than most from a stock market perspective. . . at least to me.  On the way into the office, the Dow Futures were down 550 points which was the “limit down” meaning they couldn’t drop any further. It was expected to signal a horrible day for the market and it did indeed open down and slipped as far down as 500 points.  By the end of the day, the market was “ONLY” down 312 points or 3.59%.

Now… I’m not always the brightest crayon in the box and I’ve had a good bit of our savings (not our emergency fund mind you) in the market only to watch it whither over the past couple months.  I find myself constantly guessing that it can’t go down MUCH further… right? And yes, I said guessing, because quite honestly, I think that’s about the best that anyone can do at this point.  The market is not acting rational, which I guess in reality is just a nice way of saying it’s not doing what I would like it to do, which is turn around, or at least quit falling.

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As I was reviewing some of our financial accounts, I realized that pay a pretty good bit of money in interest to an American Express card that I have. I use this card for a business that we own which stocks inventory, and as a result I am constantly charging large amounts to it as well as making payments. I’ve had the card since 2000 and have never made a late payment. I also have good credit. All of these play into what your interest rate is on a credit card… but the getting a lower rate really boils down to one thing, and as simple as it is, I have never gotten around to it.

What is this secret to credit card bliss you wonder?

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This is a question that many people have with faced available funds either because they are spending less than they make, or receive a lumpsum such as from a tax refund or selling something. There are a lot of opinions on the topic, so I figured that I would put mine out there, which is from the perspective of a mid-thirties man with a working wife and two kids.

Most of the time, when this topic comes up, it get’s boiled down to interest rates or rates of return, but I think that overlooks a very important component in my life and that is security. My standard of living currently dictates that my wife and I both work. Keep in mind that this is by choice. We could lower our standard of living and certainly live off one of our incomes, but we choose otherwise. When we made this decision, one of the largest considerations was buying a house. We wanted a house that was large enough for our family, plus one more if we are so blessed, and room for guests to stay when they come in town. We feel blessed that we could even consider a house like we have, so we also wanted to make sure that we share that and we make our house available when we can for things like our weekly Bible study which includes sometimes upwards of 20 people with their children.

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My wife and I decided about 6 months ago that we would begin cutting coupons.  To be fair, I decided after talking to some friends about how much they were saving.  Somehow she ended up doing all the work, but we’ll breeze by that for now as it’s not he point to be made.

I’ve always considered coupon cutting as a lot of work for very little benefit, and indeed it can, however when paired with a powerful system that combines coupons with sales trends, store sales, and expiration dates, it can be powerful.  Some people report saving as much as 80-90%, though we have not yet achieved those savings, at least as an average.  We do typically see 40-60% savings though and we get a number of products for free.

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