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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If you are consistently paying off your credit cards and keeping other debt low, you’ll eventually get higher credit limits—typically well past what you would reasonably use for daily expenses.
So it’s not uncommon for people with healthy established credit to have credit limits of 20-30K but not use more than 2-3K/month with normal use, even with putting almost all expenses on the card for cash back or points. (Obviously amounts will vary depending on income and expenses).
If you’re just starting out or have low income, your credit limits will be lower as the credit companies figure out whether you’re a good risk or not. It takes a while to get to a point where you can optimize rewards without hurting your credit score.
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