How to get maximum reward points without destroying credit score?

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Volcanon
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How to get maximum reward points without destroying credit score?

Postby Volcanon » Wed Apr 02, 2014 3:48 am

Hi,

I could use some advice, mainly on managing credit utilization ratio while I use my new rewards card. It looks like this forum is the right place.

So, last night I just registered for my first ever rewards credit card (The Barclaycard Arrival World Mastercard). My goal is to really use it as much as possible to accumulate mileage.

However, I'm worried about credit utilization ratio really hurting my score in the future.

Right now my FICO score is about 770. I have a mortgage and a car loan. My credit history is fairly young - 7 years. No late payments on anything.

My three credit cards are:
1. Bank of America Visa - $1500 limit (my first and oldest card)
2. Capital One Mastercard - $1000 limit (I never use this)
3. Barclaycard Arrival World Mastercard - $3800 (just registered yesterday)

So my total available credit is only $6300. If I go charging up a storm every month on the Barclaycard, will this really hurt me? Should I try for another credit card to boost my available credit?

There's also something else I don't understand. When you use a rewards credit card, do you get points at the moment you make the purchase, or do you have to wait for the purchase to show up in the monthly statement? I ask because the way I currently use my credit card is to proactively pay it off as soon as possible. I rarely wait for the charges to show on a bill.

Is paying off charges before the closing date a way to drop credit utilization ratio?

Thanks!


linuxmachine
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Postby linuxmachine » Wed Apr 02, 2014 10:44 am

Volcanon wrote:Hi,

I could use some advice, mainly on managing credit utilization ratio while I use my new rewards card. It looks like this forum is the right place.

So, last night I just registered for my first ever rewards credit card (The Barclaycard Arrival World Mastercard). My goal is to really use it as much as possible to accumulate mileage.

However, I'm worried about credit utilization ratio really hurting my score in the future.

Right now my FICO score is about 770. I have a mortgage and a car loan. My credit history is fairly young - 7 years. No late payments on anything.

My three credit cards are:
1. Bank of America Visa - $1500 limit (my first and oldest card)
2. Capital One Mastercard - $1000 limit (I never use this)
3. Barclaycard Arrival World Mastercard - $3800 (just registered yesterday)

So my total available credit is only $6300. If I go charging up a storm every month on the Barclaycard, will this really hurt me? Should I try for another credit card to boost my available credit?

There's also something else I don't understand. When you use a rewards credit card, do you get points at the moment you make the purchase, or do you have to wait for the purchase to show up in the monthly statement? I ask because the way I currently use my credit card is to proactively pay it off as soon as possible. I rarely wait for the charges to show on a bill.

Is paying off charges before the closing date a way to drop credit utilization ratio?

Thanks!


The answer to your last question in general is yes, but it really depends on when the bank reports to the bureaus. However it is safe to say that util reported will be zero if you pay before statement.

Also you could always apply for another card or ask for a credit limit increase on your other cards to expand your overall limit

haikuginger
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Postby haikuginger » Wed Apr 02, 2014 11:00 am

It's important to note that credit utilization over time doesn't affect your score now. So, it doesn't matter if you consistently use 99% of your available credit as long as you start paying before the statement a couple months before you apply for new credit, giving enough time for the lower usages you get that way to report.

Volcanon
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Postby Volcanon » Wed Apr 02, 2014 11:18 am

haikuginger wrote:It's important to note that credit utilization over time doesn't affect your score now. So, it doesn't matter if you consistently use 99% of your available credit as long as you start paying before the statement a couple months before you apply for new credit, giving enough time for the lower usages you get that way to report.


This is helpful! - If I understand it right.... so the credit utilization ratio is like a "snapshot" of your current debt to credit ratio? It's not some sort of average tracked over time? So if you want to apply for a new loan/CC, you just need to make sure it is good before applying?

haikuginger
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Postby haikuginger » Wed Apr 02, 2014 9:44 pm

Volcanon wrote:This is helpful! - If I understand it right.... so the credit utilization ratio is like a "snapshot" of your current debt to credit ratio? It's not some sort of average tracked over time? So if you want to apply for a new loan/CC, you just need to make sure it is good before applying?


Exactly. It's best to plan ahead about getting new credit. Then, a couple months out, start paying off your balances ahead of time so that you're only reporting ~5% utilization. If you're not planning on adding more credit, there's absolutely no permanent harm in having large balances report.

takeshi
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Postby takeshi » Thu Apr 03, 2014 10:38 am

Volcanon wrote:There's also something else I don't understand. When you use a rewards credit card, do you get points at the moment you make the purchase, or do you have to wait for the purchase to show up in the monthly statement

Depends on the rewards program. Most I've seen don't instantly credit and do so at statement close. Some credit on the following statement.

Still not clear on why you're asking. Are you thinking that you won't get rewards if you pay early?

haikuginger wrote:If you're not planning on adding more credit, there's absolutely no permanent harm in having large balances report.

Depends on the details. While utilization is updated with no "memory", high utilization over long periods of time can lead to AA. I wouldn't interpret the "no memory" thing to mean that the general 30% recommended max doesn't apply.

Nachos Libres
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Postby Nachos Libres » Thu Apr 03, 2014 11:55 am

How much do you consider "charging up a storm"? I applied and received the Barclaycard Arrival last August and was only approved for $5,000. Once I received the card I called and told them that wasn't going to be sufficient because I would hit that limit in 2 weeks and they bumped up my credit limit to $15,000 over the phone. I asked for another limit increase of $10,000 a month or so ago but was only given $5,000 because of my high utilization of the card (I would pay the full balance immediately after the statement hit).

I now instead just keep the balance at 10% so anytime my balance goes over $2,000 I just pay the full amount - which means I have to make several payments a month. It is a little of a hassle but keeps the credit utilization low while allowing to earn full rewards. Also, with the Arrival you get credit once the charge clears - so paying the balance early doesn't affect the rewards.

If you are going to be hitting the limit within a month then you definitely should ask for a credit limit increase - and at the minimum just make multiple payments. Thankfully Barclaycard doesn't set a limit on how many payments you can make online.

Volcanon
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Postby Volcanon » Thu Apr 03, 2014 4:17 pm

Nachos Libres wrote:How much do you consider "charging up a storm"? I applied and received the Barclaycard Arrival last August and was only approved for $5,000. Once I received the card I called and told them that wasn't going to be sufficient because I would hit that limit in 2 weeks and they bumped up my credit limit to $15,000 over the phone. I asked for another limit increase of $10,000 a month or so ago but was only given $5,000 because of my high utilization of the card (I would pay the full balance immediately after the statement hit).

I now instead just keep the balance at 10% so anytime my balance goes over $2,000 I just pay the full amount - which means I have to make several payments a month. It is a little of a hassle but keeps the credit utilization low while allowing to earn full rewards. Also, with the Arrival you get credit once the charge clears - so paying the balance early doesn't affect the rewards.

If you are going to be hitting the limit within a month then you definitely should ask for a credit limit increase - and at the minimum just make multiple payments. Thankfully Barclaycard doesn't set a limit on how many payments you can make online.


Well, I'm thinking about putting all my expenses save my mortgage payment through the card. $3800 limit is probably sufficient for most of the time, but I may bump up against that limit sometimes.

I'm intrigued that you can just call and push the limit. What do you say when you call? Just that I will be hitting the limit and need more? I will try this when the card gets here. Do you think this will result in another hard pull?

Thanks for answering the part about how the the rewards work too. That's good news. I'm paranoid about letting charges linger. Unfortunately, I actually think this has hurt my FICO score in the past, as I always pay off any charges before the closing date, therefore my cards never show up as being used.

By the way - what is AA?

Nachos Libres
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Postby Nachos Libres » Thu Apr 03, 2014 4:51 pm

Volcanon wrote:I'm intrigued that you can just call and push the limit. What do you say when you call? Just that I will be hitting the limit and need more? I will try this when the card gets here. Do you think this will result in another hard pull?


Yes, I just told them that I would hit the limit. I think the guy asked me what my income was and they may have done a hard pull - but you could just ask before they do it. At the time I didn't care because I didn't really know about hard pulls and besides I needed the higher credit limit anyway. I don't think I would have a higher credit limit right now if I hadn't requested one.



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