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I continuously use my credit card for my friends' expenses. Normally I could spend 20~30K USD each month to get more points/cash back. I don't have large credit limits so in most time I'll put cash into card first then spend money. I always fully pay my debts every month and normally use less than 30% of my credit limits.

Any problem with this approach? Will it become a bad record from the bank's perspective? Will it downgrade my credit score?

Thanks

Kay
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2 Answers2

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How will going from 75% Credit Utilization to 0% Credit Utilization affect my credit score? might answer your question if US based.

In the US, what counts is what shows on the bill. I've run $20K through a card with a $10K limit, but still ended the month under $2K by making extra payments. As long as you stay ahead of the limit by making mid-cycle payments, I see no issue with this strategy. If you keep running $30K/mo through a card with a $10K limit, the bank will eventually catch this and raise your limit as you will have proven you are more credit worthy.

Community
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JTP - Apologise to Monica
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    Some cards limit the number of payments that can be made during each billing cycle to 4 or 5 which might affect the strategy of charging more than the credit limit during a billing cycle and paying it off before the end of the billing cycle. – Dilip Sarwate Apr 23 '14 at 15:12
  • The reaction might not be favorable (raising your limit). If your annual income is 50k, and they give you a 5k limit, running 20-30K through the card each month is suspicious & can trigger a financial review – VBCPP Apr 23 '14 at 15:22
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    Interesting - I believe you both, but haven't experienced either response myself. – JTP - Apologise to Monica Apr 23 '14 at 15:30
  • @VBCPP: What would they do if a financial review is triggered? I've started the strategy for six months and nothing special happened (like getting calls from the bank) for now. – Kay Apr 23 '14 at 15:38
  • @DilipSarwate: That's interesting. I didn't noticed there's a limit yet. I've just checked my record and there's a month that I've made ~10 payments. Thanks for the information. – Kay Apr 23 '14 at 15:40
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    @VBCPP - I understand the fraud concern, but a pattern of high spending and paying in full is a benefit to the issuer, as they are making money on the volume of transactions. I doubt they would look to discourage such behaviour. – JTP - Apologise to Monica Apr 23 '14 at 15:41
  • @JoeTaxpayer "what counts is what shows on the bill" -- is there evidence that credit issuers report outstanding balance to the credit bureaus on the same date as the statement is issued? – dg99 Apr 23 '14 at 15:47
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    @JoeTaxpayer it frequently occurs with suspicion of manufactured spending, which is something they want to discourage – VBCPP Apr 23 '14 at 15:50
  • @Kay it varies by company. You may need to submit tax returns or other irs forms, or you may just have to answer a few questions on the phone. If you aren't doing MS I would probably with joe & say you should be fine – VBCPP Apr 23 '14 at 15:52
  • @dg99 - If you've witnessed anything to the contrary, I'd like to see it. You can pull your free credit reports from the 3 agencies and confirm they show the same number as the billed amount. – JTP - Apologise to Monica Apr 23 '14 at 15:54
  • Regarding maximum number of payments in a month (discovercard): As a security measure, if you make payments more often than every 3 days, they may not be reflected in your available credit for up to 8 days. – mhoran_psprep Apr 23 '14 at 19:05
  • When I've exceeded my credit limit, the bank's response has never been to automatically increase my credit limit, but rather to charge me a fee for going over the limit. Also, they usually put a break on new charges pretty quickly. The idea of a credit limit is, well, that it's a LIMIT. The bank is not convinced that you are able to repay more than that, and so won't loan you that much money. – Jay Apr 23 '14 at 21:10
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    @Jay - I am not talking about exceeding a limit, but making frequent payments to avoid getting anywhere near the limit. If you have a $10K line, but spend and send in $5K every week, you're likely to be offered an increased line. – JTP - Apologise to Monica Apr 23 '14 at 21:29
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Sometimes when you are trying to qualify for a loan, the lender will ask for proof of your account balances and costs. Your scheme here could be cause for some questions: "why are you paying $20-30k to your credit card each month, is there a large debt you haven't disclosed?". Or perhaps "if you lost your job, would you be able to afford to continue to pay $20-30k".

Of course this isn't a real expense and you can stop whenever you want, but still as a lender I would want to understand this fully before loaning to someone who really does need to pay $20-30k per month. Who knows this might hiding some troublesome issues, like perhaps a side business is failing and you're trying to keep it afloat.

mlathe
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