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Suppose that you have two Credit Cards (denominate them CC), each with a limit of $2000 CDN.
CC1 is preferred (because it offers Cash Back), but has a Current Balance of $600.
Thus, even if I pay the $600, then for this month, my CC1 use would still exceed the suggested 30% ratio (600 + 2000).

CC2 offers no Cash Back, and has no Current Balance.

I must purchase something this week that is $2000. Does it matter which CC I use?

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3 Answers 3

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Simple:

  • go online and pay the $600 you have already charged CC1
  • after the payment has cleared the account balance, buy the $2000 item with CC1.
  • send a payment of $2000 to CC1.

Some people have been able to prepay for the big item and temporarily increase their credit limit. Make sure that you really can fit that item onto that card: don't forget shipping and taxes.

The benefit is that you get the cash back. You also don't go over the limit.

In the US the key item isn't 30% usage, it is 30% utilization. They only report your current balance compared to the limit. Even if they do report it in that small window, the next month it will be back below 30% and the credit score will return to normal.

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  • Thanks. Sorry for any confoundment - I might not have written that the $600 and $200 would be charged in the SAME billing cycle. Does my updated post change your answer?
    – user44213
    Commented Jul 3, 2016 at 20:32
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    You can pay your bill anytime. you don't have to wait for the due date, or even the date for the cycle to close. My answer does remain the same.
    – mhoran_psprep
    Commented Jul 3, 2016 at 20:34
  • To be a bit more explicit. If you charge 600, then send in an early payment of 600, your account will have a balance of 0 as soon as that payment is applied, leaving you with 2000 under your credit limit to spend for your purchase next week. If you don't want a report of 100% utilization, then pay at least 1400 of the 2000 before the close of your billing cycle, and your bill will show only 30% utilization because the balance is 600 out of 2000.
    – davmp
    Commented Jul 3, 2016 at 21:05
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Don't worry about the short-term credit hit from utilization being high, unless you plan to apply for a loan in the next month or two. Utilization changes frequently, typically on a monthly basis, and there's no 'memory' of your past utilization - it's always current (at least, as current as your lenders allow).

As long as you pay this off and don't plan on applying for a loan before the next time your lender will report credit (or perhaps a month after that just in case), you should do whatever makes the most financial sense. Don't pass your actual credit limit (as that likely will cost you more money than your rewards), but a temporary surge that is up to your limit should be fine.

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At least in the US, usage is calculated overall all the credit, not for each.

So in your case, you have 4000 $ overall limit, and a usage of 30% of that is 1200 $.

In addition, only the amount on the bill gets reported, so if you go higher during the month and pay off a piece before you ever get the monthly bill, it will never be seen by the credit rating agencies.

I don't know about Canada, though.

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