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I have seen that low utilization is key to keeping or improving my credit score.

My question is more in line with credit limit, cash back rewards, and ulitilization.

If I make a purchase and then immediately pay it off, but ensure I remain under my target percentage of utilization at the end of the billing cycle, can I continue to make purchses over my credit limit within that billing cycle and get the cash back rewards?

For example I have a $1500 limit. My target utilization is 15% and my cash back reward is 1.5%. Can I charge $1500 and pay it off immediately, charge another $1500 and pay it off except for the remaining 15% to have something to show on my balance and get the 1.5% cash back reward benefit on $3000 and still keep low utilization?

  • Search this site for other questions about credit utilization. The upshot is that you can't know exactly when the card company is going to report your utilization, so you can't reliably game the system in this way. If you always pay everything off immediately it will probably not be reported as utilization, but there's no way to be sure. – BrenBarn Apr 13 '16 at 17:59
  • Ok, what about if I only made 15% ultilzation purchases and paid those off immediately? Is it possible to make infinite purchases to reap the cash back rewards and not impact credit or utilization? – MickB Apr 13 '16 at 18:12
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Yes. In my legendary blog article I got Rich on Credit Card Points I mention how I had a card with a 10% cash rebate, but only for 90 days. I bought $50,000 in debit cards in less than 90 days even though the card limit was $10,000, by doing what you suggested, paying mid-cycle, freeing up the credit, then going back for more.

The cards were for $500 and had a 1% fee. A total cost of $50,500 and $5050 cash back. We used them up over the next 18 months or so.

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There are a couple approaches to this, but first you need to evaluate what your end goal is.

Your credit score is a reflection of your credit worthiness. You can manipulate the score very easily by altering your utilization. Although it trends upwards over time, you shouldn't rely on it. As such, if your high utilization does get reported, your credit score will decrease greatly, but as soon as the utilization is addressed your credit score will revert to what it was.

Therefore, you can make your credit score high when you want to apply for credit line increases, apartments, mortgages, car loans, while playing your cash back rewards game indefinitely and actually using your credit.

As it is ideal to apply for new and additional credit when old credit inquiries fall off, there will only be intervals when you should be concerned about the high credit score, which will take one or two months to report after you fix your utilization.

This all assumes you can fix your utilization, if you lack the cash then you have to deal with that.

But remember, if you have to move, or get a car loan or be evaluated by your credit in any way, you will get unfavorable circumstances if you aren't reporting low utilization at that point in time.

Regarding your cash back aspirations, another thing to keep in mind is that many cards have a limit on just how much cash back you really can get. Such as "1.5% till $5000 spent per year", which can alter the optimal approach in several ways. If there is a limit like that, then you can avoid this whole debate by keeping your utilization low and then applying for a larger credit line, such as $10,000. With this, you can float a balance of $3,000 - $5000 with lesser affect on your credit utilization.

  • "1.5% till $5000 spent per year" why bother? My Fidelity 529 card gives 2% up to $75K/yr of spending. The 10% intro on the card I mentioned in my answer, no limit. Sorry I didn't buy $100K in cards. – JoeTaxpayer Apr 13 '16 at 20:24
  • @JoeTaxpayer that's nice, so we don't know OP's possible restrictions, but I was thinking specifically about the Chase Freedom card's 5% restrictions "Earn 5% cash back from Chase on up to $1,500 in combined purchases" as an example. I've seen other restrictions for other things, while another card may be unlimited – CQM Apr 13 '16 at 20:43
  • Agreed, the 5%-6% rotating categories most often have low limits. 1.5-2% usually not so bad. Definitely a YMMV issue. – JoeTaxpayer Apr 13 '16 at 20:59

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