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.
In: 0
1. Its best to use your credit card for every purchase possible. Not only do you get rewards, but you also get protection from liability. Anyone telling you to minimize usage is an idiot.
2. There is a component of the credit score based on utilization but the way to maximize that is to get the largest line of credit possible. If you have a $100,000 line of credit you’re never gonna go over 10% anyways.
3. Your credit score is irrelevant unless you’re currently applying for a loan. The utilization factor updates monthly. Even if you don’t have a large line of credit you could just minimize usage the month before you buy a car or house. No need to do it continually.
4. Credit card rewards are EXTREMELY valuable. The 2% back is just child’s play. By revolving through multiple cards you can get thousands in free travel a year.
PS: All this assumes you’re an intelligent and financially responsible person. Most of the “common sense” advice is based on the assumption that you’re an idiot and is therefore wrong if you’re not.
Latest Answers