Credit card debt is now higher than it
was before the ;nancial crisis. It makes
good business sense for a card issuer to
think about reducing its risk by trimming
Also, even if you are fully paid up on
your cards, they may ding you if they
notice you have taken on more debt—a
new mortgage, car loan, student loans—
or your income has dropped.
The impact of a lower credit limit
on your credit score should be minimal,
because you don’t charge much and you
pay your bills on time. A key part of calculating your credit score is comparing
your unpaid balances with the total available credit limits on all your cards, called
the credit utilization rate or ratio. The
lower the ratio, the better. If you are
paying o; your balances each month,
you should be ;ne.
If your cards don’t charge an annual
fee, I would not cancel them.
Investing a nest egg,
and getting credit where
credit is due
Q I have about $35,000 that is sitting in
my savings account and that I would like
to put to work for me. I have a stable job;
I am 30 years old, single, with no kids
and no debt.
—Ana V., Montclair, California
A My No. ; rule of building ;nancial
security is to have an emergency savings
fund that can cover your essential living
costs—rent, utilities, food—for at least
eight months. Money in a savings account
that is for emergencies is not just “sitting”
there. It is the foundation of your security.
As far as any extra money, it all
depends on your priorities. Assigning
speci;c goals to your investing is important because each goal might have a di;erent time frame. For instance, if your
intention is to buy a house in the next ;ve
to seven years, you need to invest your
down payment savings more conservatively (think: high-yield savings accounts
or short-term bond funds) than if you are
investing for a retirement that is decades
away (think: stocks).
See “Investing tips,” below.
Q I have a credit score of 825. Recently
I’ve received notices from two di;erent
credit card companies that my limit
amounts are being lowered because I
don’t charge enough or often enough.
Will this a;ect my credit score? I’ve
heard you shouldn’t ever cancel a credit
card, but in this case should I?
—D. Langston, Crescent City, California
A Credit card issuers are running a business, and the total amount of credit limits
on their cards is part of the risk side.
Do you want to buy a home?
If so, investing in a down
payment might be an option.
Or perhaps you are interested
in being able to a;ord to retire
sooner rather than later? If so,
investing in a Roth IRA is smart.
I recommend opening an
account (or multiple accounts
for di;erent goals) at a dis-
count brokerage. Discount
brokerages have a lineup of
funds and index mutual funds
that you can buy and sell with-
out paying a commission.
Discount brokerages also
have free articles and tools you
can use to learn more about
what specific investments—and
mix of investments—will help
you reach your goals.—SO
The credit utilization ratio is
the unpaid balances on all
your cards compared with the
total available credit limits.
The lower the ratio, the better.
is an Emmy Award–
winning TV host, New
York Times best-selling
author and motivational speaker. Orman
will answer selected
questions in this
column. She regrets
questions cannot be
in the subject line.
Q&A with Suze Orman
P.O. Box 34088