Author Topic: Cashback vs Utilization on CC  (Read 2900 times)

flygirl

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Cashback vs Utilization on CC
« on: October 22, 2012, 05:43:36 PM »
Hi there! I just got my first ever credit card in the mail. (I'm 26, researched and applied for it, intend to pay it off in full every cycle) I wanted to have one just to build credit, but I picked one with cash back, because I love dollars. Here's my question: I know that utilization is important to pay attention to with credit cards, that basically you should only spend like 30% of your limit before it becomes bad for your credit. That said, I'm in school right now (tuition reimbursed by employer) and will be paying about 5k upfront every semester (2x per year). I do have the money, I'll be able to pay it off immediately but it's 5k out of a 6k credit limit. Is that going to ruin my credit score for a long time if I do it like 6 times in 3 years and then never again? I don't plan on needing the score to be good right away, I just wanted to start building before I needed it.

thanks!

DocCyane

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Re: Cashback vs Utilization on CC
« Reply #1 on: October 22, 2012, 05:49:40 PM »
I used to pay my tuition on a credit card to get the cash back. Then I'd just pay it off super quick... As in, a week later. It never affected my credit worthiness.

MooreBonds

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Re: Cashback vs Utilization on CC
« Reply #2 on: October 22, 2012, 06:57:14 PM »
 I don't know this for a fact, but my understanding is that when you apply for a loan, then and only then do they typically look at your total debt outstanding (or maybe the previous month or two as well), as long as your accounts have been in good standing and you pay in accordance with the terms of your credit card.

However, a more important question: some colleges will charge you more if you pay with a credit card. Ask the office if they will give you a discount for paying with cash. The college will have to pay 2% to the credit card company, so the should be willing to give you a discount for paying with cash - and that discount should be better than the cash back you get from your credit card company.

simonsez

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Re: Cashback vs Utilization on CC
« Reply #3 on: October 23, 2012, 06:09:51 AM »
a) there is a chance it won't negatively affect your credit score, your utilization is figured monthly e.g. if you were charged 5k of tuition on the first of the month and paid it on the 5th of the month but your utilization ratio isn't calculated until the 15th of the month, it won't negatively affect your score
2) even if it did, the long-term gains to your FICO by establishing a line of credit and making on-time payments will eventually make it a net positive situation
d) you say you don't need your score to be good in the near-term anyway, 3 potential 2 point dings or so over the course of years is only a drop in the bucket, don't worry, you'll be fine

Worsted Skeins

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Re: Cashback vs Utilization on CC
« Reply #4 on: October 23, 2012, 06:16:07 AM »
Side issue:  some colleges charge an additional fee if tuition is paid with a credit card.  I would investigate whether your school does this.

KC

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Re: Cashback vs Utilization on CC
« Reply #5 on: October 23, 2012, 06:46:59 AM »
If you get another credit card and never use it your ratio of utilization/available credit would be smaller and would probably solve your "problem". I have 3 CCs sitting in a drawer that I was told to keep for this reason (I've actually never seriously looked into this but might be worth investigating!)

flygirl

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Re: Cashback vs Utilization on CC
« Reply #6 on: October 23, 2012, 07:44:24 AM »
It looks like my school will accept a CC! yay, grocery money! thanks for your help everyone!