Can You "max Out" All Your Credit Cards At Once?

Q: I have about 10 major credit cards with credit limits ranging from about $1,000 to about $10,000. The sum of my credit limits is about $50,000 and I am currently about $15,000 in debt. There is no negative information on my credit report except possibly one erronesous entry of a payment made over 30 days late. I am wondering, first of all, how much communication there is between the various banks who issue the cards with regard to what my overall credit situation is; and whether there is more communication and collaboration between banks who offer the same type of card, i.e. Visa cards. I want to know if my overall debt reaches a certain amount, i.e. $20,000, if that might trigger some or all of the banks to cut my credit limit or even cancel my account, fearing that once I have gotten that much in debt I am somewhat likely to file for bankruptcy. I also want to know if I wanted to take cash advances up to my credit limit on all my cards at one time (as I am interested in starting a business), if I would be likely to run into problems due to inter-bank communication and withdrawal limitation procedures. Any information that anyone has on these subjects would be very much appreciated.

A: -My first reaction to this is to say "pay off your debts, save the money to start a business, and then start one." I however understand the catch-22 situation here. I think you could get away with it---a given card issuer may refuse, but I think if you goto a bank, give in a proper ID, and give your card, they'll give you cash up to your credit limit. However, once you get the cash, and the balances start showing up on your credit reports, you will have trouble getting more credit (assuming your income isn't so high that it makes $50,000 look like nothing). But even if a credit-issuer decides to "close" the account on you, I doubt they can make you pay your entire balance---you probably can pay it off at the rate in the cardholder's agreement. It seems to me you'll be better off with a bank loan. -It's my understanding that banks don't make a routine practice of sending information directly to each other. However, they do send this information to credit bureaus, and other banks may in turn request the information on you from the credit bureau. If you check your credit reports from the "big three" credit bureaus, you'll probably find quite a number of "annual review" or "AR" credit inquiries, from the banks you have cards with-- this is how the banks check up on you. They frequently say that this is to decide whether or not to raise your credit limit or extend you a better deal, and that's certainly true, as far as it goes--that sometimes happens. However, based on the information they see, they may also decide to _lower_ your credit limit, or raise your interest rate, or simply cancel your account. The last time I reviewed my own credit reports, TRW and Experian listed only the credit limit and the "high balance"--the most you've ever owed on that card. However, Trans Union also listed the _current_ balance, as of the last report they received from the bank in question. So, yes, this information is at least available to banks. -this could definitely get you into trouble. And the trouble you have in mind could be the _least_ of your problems. If you do this, and if the banks see that you are doing this, they are almost certain to close your accounts. They are likely to immediately start collection action if you're at all slow with a payment. And, if you believe that bankruptcy will get you out of this, you may very well be wrong. If you max out all your credit cards at once--rather than taking the more conventional course of finding a bank or credit union to extend you a business loan--then a strong argument could be made that you withdrew the money with bankruptcy already in mind, with no real plan to repay other than by declaring bankruptcy. In at least some states, that would make the cash advances "fraudulent conveyances"--and fraudulent conveyances _cannot_ be discharged in bankruptcy. In other words, even if you declare bankruptcy, you could still be personally on the hook for the money. If you think your current credit situation is bad, trust me--it is absolutely _nothing_ compared to this situation. I'm fortunate enough not to have been there myself, but I had an acquaintance go through it, and it nearly drove him to suicide. This is the sort of mistake that you may _never_ be able to recover from. If you're considering starting a business, when you're already in a tough personal credit situation, you should definitely talk to an accountant or attorney, and get some professional advice. If you are even _contemplating_ starting a business with credit card cash advances, without having already received this advice, you should skip the accountant or attorney, and go directly to a psychologist. Unless there are truly extraordinary circumstances that you haven't mentioned, what you're proposing is financial suicide, plain and simple. -I feel sorry for you, since you have fallen into a very common trap laid by these institutions. To make a long story short, you really should find a way to pay them all off - one at a time is often suggested by credit counseling agencies - and to rely on other sources for working capital - real estate-secured, primarily. But, the answer to your question is no, the institutions don't communicate, although they can draw a credit report at any time, which will of course indicate any 30-day or more lates, and they will certainly use that information reduce your credit limit, raise your interest rate, etc. Don't be naive enough to think otherwise... Mark this day - a few years from now, if you stick with these institutions, you should add up all that you've paid in various fees and interest, and you'll wish you had taken my advice...Unfortunately, I speak from many years of paying high credit-card interest until I woke up - no one offered me advice - and relied on real estate for working capital... The best of luck to you - you'll need it with high credit card debt....

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