I’ve been looking at articles about credit cards and a lot of them say to keep credit card utilization under 30%, ideally under 10%. If that’s true, does that mean cashback should rarely be above $1-2 per month? Is cashback a strange way to lower your credit score in exchange for small amounts of money? I couldn’t find anything explaining the relationship between these two opposite mechanisms of credit cards. Thanks.
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So first of all, your credit card company doesn’t want you to minimize your credit card usage – it wants you to maximize it. That’s why they give you rewards for using it. The person who doesn’t necessarily want to go all-out on your credit card is you, if you are a responsible individual.
Second, you can do both. The main thing that will hurt your credit score is your outstanding balance. You can (usually) pay off (part of) your outstanding balance whenever you want, so there’s no need for it to ever get very high if you have the funds to pay it off. If you can afford to pay for a purchase by debit card, you can also afford to pay by credit card and simply pay off the resulting debt immediately. So if you can choose between a debit card with no rewards, and a credit card with rewards, the latter is almost always a better choice.
(It’s stupid, really, because ultimately people who don’t have (good) credit cards end up subsidizing this system for those who do – it’s not like credit card companies just give you rewards as a present out of the goodness of their hearts. Plus, as if pricing in the US wasn’t already complicated enough (with tips, sales tax not shown on labels, etc.), it adds more mental calculus to every single purchase you make. Money should just be money – not another product that itself can have different prices or value. I’m glad I don’t have to deal with this nonsense any more.)
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