Card usage - usage limit

[Anonymous]

Greetings everyone,

I’m new to this forum and using a CC properly and I’ve see some statements that say you shouldn’t spend more than your credit limit in a cycle, however I can’t find any hard facts. What I want to know is, will I be penalized for say spending $1600 on a $1500 CL card in a month by way of spending $200-$300 multiple times and paying it off each time I use it to maximize cash back or other bonuses. Thanks for any help.

[simplynoir]

I think when people meant in one not spending more than one's credit limit in a cycle is primairly for utilization purposes in relation to credit scores. In your case/example it should be fine to do what you're doing especially if you have multiple expenses running through the card and you need the credit line freed up to continue doing so. As long as your payments are good credit card companies normally don't care how you pay as long as you do.

[Anonymous]

Check with your card issuer. Most of that could be found online. For example, with my Capital One Quick Silver card, I can spend over my credit limit without being penalized. However, they do mention that if I overspent my CL, the amount I went over will not increase my reported CL. 

For example, my QS1 card has a CL of $5k.

I put 6k on the card this month

My reported CL will remain 5k. Not 6k. 

Of course, it's important to note that my utilization on that card will be 120%. So keep that in mind.

I will still have the option to pay it down however I like over time. 

[Anonymous]

I don’t plan on maxing out, or going over my CL at any single time. I just want to maximize my cash back bonus by using my card to pay on items I would buy anyways, which over a month would be greater than my CL, but never more than $200-300 in usage at any given date in the cycle. I want to just use it and keep paying it off each time I do.

[Anonymous]

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@Anonymous wrote:
 will I be penalized for say spending $1600 on a $1500 CL card in a month by way of spending $200-$300 multiple times and paying it off each time

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My understanding is that this will not be a problem, within reason, which $1600 on a $1500 card is reasonable.  What lenders take issue with is "artificially" increasing credit limits by overpaying an account and creating a credit balance, for example if you have a $100 statement balance and make a $600 payment, thereby increasing your "available credit" to $2000. This can be viewed as red flag behavior by some lenders.

The other consideration would be if your credit limit was set at $1500 due to income restraints. If your usage indicates that you are spending considerably more than the income you gave would normally allow, this could also be a red flag.

The reason for both of these general rules relate to various fraud concerns. If you have a $1500 credit limit due to being new to credit, new to a particular lender or because of negative factors in your profile, but your income supports your spending, using a card heavily then paying in full can in some cases lead to credit limit increases. I think the forum would need more info regarding your credit age, any negative profile items and income to give a more detailed response. Hope this helps!

[Anonymous]

I had a chapt. 7 bankruptcy in 2010 and closed my only cc in 2013. I have a car I’m almost done paying off which had several delinquent payments years ago and a paid collection which hasn’t fallen off yet.

[Anonymous]

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@Anonymous wrote:
I had a chapt. 7 bankruptcy in 2010 and closed my only cc in 2013. I have a car I’m almost done paying off which had several delinquent payments years ago and a paid collection which hasn’t fallen off yet.

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Welcome to the 2010 BK7 club, seems to have been a popular year. There are others here with far more expertise than I, but I would recommend using your CC for everyday spend as you need it, paying it down throughout the month as you have been, and letting a small balance (under 9.8%, can be as little at $5) report each month. Important FYI is that letting a small balance report does not mean paying interest, just leave a small amount on the card as of statement close, then PIF defore due date. Rinse and repeat. This forum also has numerous threads that may be helpful with having the negative items removed your CR with goodwill letters, etc. if you're interested.

[Anonymous]

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@simplynoir wrote:

I think when people meant in one not spending more than one's credit limit in a cycle is primairly for utilization purposes in relation to credit scores. In your case/example it should be fine to do what you're doing especially if you have multiple expenses running through the card and you need the credit line freed up to continue doing so. As long as your payments are good credit card companies normally don't care how you pay as long as you do.

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I agree,   Ideally this demonstrates to the CCC that your limit needs increasing (although they may be happy the way things are as it limits their exposure, just makes things a little more work for you).

IME, the major issue is when cycling multiples of the CL each cycle so that the total is well in excess of the declared income  (this is the hallmark of MS).  Your figures won't arouse any suspicion.

[Anonymous]

As long as you don't go above 30% utilization at any point your credit score will not be negatively affected.

So if you pay off the balance before 30% and repeat several times in the same month I don't think your creditor should have an issue with this.  Seems very logical in your situation.

[HeavenOhio]

@Anonymous, keep in mind that staying under 30% means 28.9% or below. Actually, with a single card, 8.9% or below would be better. But 28.9% is considered to be responsible borrowing, and it may leave your score at a level that satisfies you.

Utilization is simply a snapshot in time, and one month doesn't affect the next. That means there's no harm in testing to see how your score might be affected by different utilization levels. With the way you're using this card, that'll probably occur naturally without a conscious effort to test.