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I continuously use my credit card for my friends' expenses. Normally I could spend 20~30K USD each month to get more points/cash back. I don't have large credit limits so in most time I'll put cash into card first then spend money. I always fully pay my debts every month and normally use less than 30% of my credit limits.

Any problem with this approach? Will it become a bad record from the bank's perspective? Will it downgrade my credit score?

Thanks

  • Please add a country tag, else you might get a US-centric response. – JoeTaxpayer Apr 23 '14 at 14:26
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How will going from 75% Credit Utilization to 0% Credit Utilization affect my credit score? might answer your question if US based.

In the US, what counts is what shows on the bill. I've run $20K through a card with a $10K limit, but still ended the month under $2K by making extra payments. As long as you stay ahead of the limit by making mid-cycle payments, I see no issue with this strategy. If you keep running $30K/mo through a card with a $10K limit, the bank will eventually catch this and raise your limit as you will have proven you are more credit worthy.

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    Some cards limit the number of payments that can be made during each billing cycle to 4 or 5 which might affect the strategy of charging more than the credit limit during a billing cycle and paying it off before the end of the billing cycle. – Dilip Sarwate Apr 23 '14 at 15:12
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    Interesting - I believe you both, but haven't experienced either response myself. – JoeTaxpayer Apr 23 '14 at 15:30
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    @VBCPP - I understand the fraud concern, but a pattern of high spending and paying in full is a benefit to the issuer, as they are making money on the volume of transactions. I doubt they would look to discourage such behaviour. – JoeTaxpayer Apr 23 '14 at 15:41
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    @JoeTaxpayer it frequently occurs with suspicion of manufactured spending, which is something they want to discourage – VBCPP Apr 23 '14 at 15:50
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    @Jay - I am not talking about exceeding a limit, but making frequent payments to avoid getting anywhere near the limit. If you have a $10K line, but spend and send in $5K every week, you're likely to be offered an increased line. – JoeTaxpayer Apr 23 '14 at 21:29
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Sometimes when you are trying to qualify for a loan, the lender will ask for proof of your account balances and costs. Your scheme here could be cause for some questions: "why are you paying $20-30k to your credit card each month, is there a large debt you haven't disclosed?". Or perhaps "if you lost your job, would you be able to afford to continue to pay $20-30k".

Of course this isn't a real expense and you can stop whenever you want, but still as a lender I would want to understand this fully before loaning to someone who really does need to pay $20-30k per month. Who knows this might hiding some troublesome issues, like perhaps a side business is failing and you're trying to keep it afloat.

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