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What's the term for?

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Anonymous
Not applicable

What's the term for?

I'm in the middle of rebuild, with that said, I maintain two $500 secured credit cards (TD Bank Secured Visa & Bank of America Cash Rewards Mastercard) that allow me to get 3% cash back on Groceries, 2% cash back on Dining and 1% cash back on everything else.

 

I use these cards to pay for everything, with the exception of my rent/car note, all while making multiple payments throughout the month, never once allow either card to report no more than 10% of my utilization.

 

I watched a YouTbe video about a year or so ago, that spoke about people maxing out there cards, allowing the balance to post a couple of days later, then paying it right off, then repeating several time a month. 

 

For example, your credit limit is $10K, you spend $9K to $10K,  pay it right off, then as soon as your balance is updated, you spend another $9 to $10K, paying it right off, making certain at least two days prior to your statement close date that you have a zero balance or a balance of no more than 7%.

 

What's the financial/credit glossary term for this?

 

p.s. I don't do that, I just pay certain bills and then pay it off, as I know it's considered unethical, just wanted to know the term, since I can't find that YouTube video.

Message 1 of 61
60 REPLIES 60
Anonymous
Not applicable

Re: What's the term for?

its called credit cycling. It's borderline money laundering, if being done on very large scales.

Message 2 of 61
AllZero
Mega Contributor

Re: What's the term for?

Hmmm...

PIF Pay In Full?
PTZ Pay To Zero?
Cycling?

What's unethical about paying your debt?
Message 3 of 61
Anonymous
Not applicable

Re: What's the term for?

Thank you, you are spot on "Credit Cycling."

 

With that said, some of stated that if an issuer see you using a ton of you credit limit, that they tend to automatically give you a credit limit increase.

Message 4 of 61
Anonymous
Not applicable

Re: What's the term for?

I didn't mean PIF,/PTZ as there is absolutely nothing wrong with paying your bills, I simply could remember the term and the first responder was helpful, as it's called "Credit Cycling."

 

I used my cards like debit cards for products/services I was going to have to pay for anyway, and wanted to maximize my cash back rewards, that's all.

 

Doing what I do is one thing, but doing it with large limits is borderline illegal, as the last posters stated.

Message 5 of 61
AllZero
Mega Contributor

Re: What's the term for?

I guess it could be construed as such defending on the situation.

Given your current CL, I think you'll be okay.

In case you didn't know, if your credit report supports it, BoA is known to graduate early. They also offer soft pull credit limit increase request.
Message 6 of 61
Anonymous
Not applicable

Re: What's the term for?

From late 2017 to early 2018 I applied four times for the BOA Cash Rewards Secured Mastercard and the first three times, I never obtained a response, so I went into a branch, a was lucky enough to speak to the branch manager, who was covering for an employee, who had went to lunch.

 

He called a credit analyst and explained that I had applied four time with no response, the credit analyst stated that or some reason they had two different addresses in their system for me, and couldn't verify my identity and so for my security they weren't allowed to send a letter to either address.

 

But, he updated my address and approved me on the spot.

 

The problem is, BOA has yet to graduate me, stating too many inquiries, the problem is four of my 12 inquires are from them!

 

I am afraid to contest them, because I've read if you contest an inquiry for an active account that said account can be closed.

Message 7 of 61
AllZero
Mega Contributor

Re: What's the term for?

Glad you were able to get approved for the secured card. It does suck that it took more than one inquiry to get it.

I don't know about contesting with BoA. Since it's from 2017-2018, inquiries become unscoreable at 365 days from date of pull. Then, they'll fall off your report in 2 years.

Hopefully, by then you'll be in better shape.
Message 8 of 61
longtimelurker
Epic Contributor

Re: What's the term for?

There is nothing borderline illegal about recycling your credit limit (as those with a very small CL on a useful card will know).    

And it's no more borderline illegal with huge limits.     Now if the activity really is money laundering, then sure, that's illegal, not even borderline.  But so is money laundering where you don't cycle any credit limits.

 

Now the issuer may not like it (although I've never seen it in the T&Cs) and may shut you down, as they can do for anything, but borderline illegal, no.   In particular, you never owe the issuer more than the agreed CL.

Message 9 of 61
Anonymous
Not applicable

Re: What's the term for?

I found the YouTube video, it was by "Ask Sebby."

 

He also stated that it could be considered moneylaundering and card issuers have closed accounts because of it, howver he did state that those with smaller limits shouldn't have anything to worry about.

 

He was spaking on people with $10K or higher CL, who will max spend, pay it off, then max spend numerous times with in the month.

 

I obviously don't own any high limit credit cards, however I do have two cash back secured cards(BOA and TD Bank) and I was researching Plastiq to see if that's a way to pay my monthly auto loan, my utilities and more to optimize the cash back.

 

Also, even though when I signed up for these two secured cards that both came with an annual fee, but I've made at lest $400 in cash back in the last 1.5 years on each card, so I made my AF and more back.

Message 10 of 61
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