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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The credit card companies don’t want you to minimize your credit card usage. They want you to use your credit card *all the time*, pay the minimum every month, and rack up gigantic amounts of interest – because that’s how they make money.
*You* want to minimize your credit card usage because you don’t want to be paying gigantic amounts of interest.
All of the rewards are the card company’s way of saying “Look at all the bonuses of using your card more! Go on and use your card more! Use your card a lot! Use your card for *everything* and you’ll get *so many bonuses*!” And it’s true, you will! And the amount of interest you pay will be *far* more than the bonuses were.
The “loophole”, obviously, is to use your card for everything and collect the bonuses…but then pay the *entire* amount off every month, so that you don’t pay interest. This relies on you having that much cash to begin with. The credit card companies are fine with this too, because they’re betting on you screwing up eventually and starting to pay interest sooner or later.
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