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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You don’t need to minimize your usage. You need to not spend money you don’t have in the first place.
So instead of paying Cash, or using your Debit card, you use you Credit card and then pay it off as soon as possible.
The Credit Card company makes money no matter if you pay interest on your card balance or if you pay it off as soon as you charge something.
They charge a fee for every single usage of one of their cards to the Point of Sale business.
So the more you use your card, the more money they make from these fees.
So they offer cash back so that you use it more.
By keeping your utilization under 30%, that just means don’t charge more than 30% of your limit.
So if you have a $1000 limit, don’t use it for any charges over $300. And if you pay it off that same day, it doesn’t matter either way.
So you could make a $300 charge today. Go home and pay it off, then go out tomorrow and do it again.
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