Using Rewards Credit Cards for big/all expenses

[takeback]

Well I just saved $1700 by changing/bundling my auto and home policies.
I did it over the phone and paid the premium in full (vs monthly) to get the rate discount. I used one of my rewards CCs (airline miles), and got to thinking- is there any negative credit rating that can come from excessive overuse of CCs for basically all expenses?

I have two different cards that i use regularly, one gives miles the other cash back. I try to use them for all my everyday expenses- gas, groceries, etc, to take advantage of the rewards. My new policy was about $600 so I paid it by CC.

BTW I NEVER carry charges and pay these off either at the end of the billing cycle or by one time online payments from my checking, so no finance charges.

If I am using it to pay for everything could it affect my cresit rating to have such high monthly consumer debt (even though it is always paid off immediately)?

Stupid question?
Thanks.....

[disneysteve]

It depends on the ratio of your charges to your credit limit. The recommendation is to never charge more than 30% of your limit, so if you have a $20,000 limit, keep your monthly charges below $6,000. Going over that 30% mark could knock down your FICO score a few points.

[JoshuaHeckathorn]

Besides payment history, what Steve is referencing affects your FICO scores the most. It's called your credit utilization ratio, and it accounts for about 30% of your FICO score. Personally, I try to keep mine around 10%, but if you're 30% or lower you should be just fine. If you're not, you might want to think about getting a 3rd card to bump up your limit. It's fairly difficult to get credit limit increases these days, but if you have good credit you should have no problem getting a new rewards or cash back card.

[Mithrin]

Another point about the utilization part of your credit score: it doesn't have a history. So if this month you're using 50% of your credit, your score will drop. If that changes to 15% next month, it will go right back up (notice if you get a copy of your report, it shows the PAYMENT history, but only the current balances and limits).

So your utilization really only matters when someone is checking your credit.

Also, credit cards only report your balance/limit to the credit bureaus once a month, on the statement date. So your balance on the credit report is the same as your most recent statement balance. So, if you have fairly low limits and don't want a high utilization showing up (perhaps you're applying for a loan, etc.), simply pay off part of the balance BEFORE the statement is generated. If you don't want the extra $600 from the insurance showing up, send in an extra $600 payment before the statement is printed, and that $600 will never exist as far as the credit bureaus are concerned.

Last point, there are two types of utilization factored in. The biggest is your overall utilization (add up all balances and divide by the total of all credit limits). They will also calculate the utilization on each individual card and factor those in as well. So if you have multiple cards and spend 4K per month, it might be better to spread it around to multiple cards, instead of letting one card go over 50% utilization, even if the overall is that same either way.

[Slug]

This is why you never close a credit card account (that doesn't have a fee). It reduces your overall utilization.

[Mithrin]

This is why you never close a credit card account (that doesn't have a fee). It reduces your overall utilization.

Closing accounts also affects part of the score that is based on the average age of accounts, where the longer you have accounts, the better. It's especially important to try to hang on to your oldest account, since the 'length of your credit report' is based on the oldest account that is still on there.