Olga Lorenko|Moment|Getty Images
The ways consumers can misuse their credit cards can range from paying their monthly bill in full to performing their balance. But here is the dangerous behavior that experts say they have never heard of: “credit cycling.”
Credit cards have expenditure restrictions. Cardholders are generally aware of this limitation. This represents the amount you can borrow an overall cap. When a user pays the invoice in full and on time, the limits are reset on each invoice statement.
Users whose credit cycle reaches that limit and immediately repay their balance. This frees up more headroom, allowing consumers to recharge effectively beyond the typical allowance.
Doing this from time to time is usually not a big deal, experts said. Speed limits are similar to driving several miles per hour. Ted Rothman, a senior industry analyst at Credit Cards.com, is unlikely to attract drivers for speeding.
But Rothman said it was consistently “burning” through available credits.
For example, card issuers can cancel a user’s card and take reward points, experts said. This could negatively affect users’ credit scores, they said.
“If there’s a slight chance that credit cycling will be sideways, it’s best to not do that and look for alternatives,” said Bruce McClary, senior vice president of the National Credit Counseling Foundation. “You need to be very careful.”
Card companies view credit cycling as a risk
According to Experian, the average US credit card limit was around $34,000 at the end of the second quarter of 2024. (This was a limit on all cards.)
According to Experian, the amount varies across generations and varies depending on factors such as income and credit usage.
It’s understand why some consumers want to credit the cycle, experts said.
More details from personal finance:
Why summer Fridays are becoming more and more rare
How GOP Megabill affects families with children
What a showdown between Trump and Powell means your money
Certain consumers may have relatively low credit limits, and credit cycling can help pay for large ticket purchases, such as home repairs, weddings and expensive holidays, experts said. Others may do that to accelerate the rewards and points they get to make the purchase, they said.
But card issuers could consider repeated criminals as red flags, Rothman said.
Maximizing your card, he said, can indicate that you are violating certain conditions or that you are experiencing financial difficulties and are struggling to stay within your budget.
The publisher may also view it as a potential indication of illegal activities such as money laundering, he said.
“You can put yourself at risk by appearing like that,” McClary said.
Credit Cycling Results
If a card issuer is punished by a credit cycling customer by closing an account, it could have a negative impact on their credit score, experts said.
Credit use is the percentage of independent debts compared to credit limits. McClary said that while relatively low usage generally helps to boost your credit score, a high rate generally hurts it.
Experts usually recommend keeping your credit usage below 30%, and if you really want to improve your credit score, it’s under 10%.
Cancelled cards reduce overall credit limits and increase the likelihood that users will have higher credit utilization if other credit cards have outstanding liabilities, McClary said.
He added that credit cards can flag misuse as a reason for account closure, which could make users appear more risky to future creditors.
Consistently violating your credit limits increases the likelihood that you will be incorrectly breached by that threshold, McClary said. In doing so, he said, could result in creditors being charged overcharged fees and raising interest rates for users.
He said you should be aware of monthly subscriptions or other charges that could inadvertently push the limits on repeated credit cycles.
What should I do instead?
Instead of credit cycling, consumers can provide better services by asking card issuers for higher credit limits, opening new credit card accounts, or paying for multiple cards, Rothman said.
As a common practice, Rothman is a “big fan” who pays off credit card bills early, such as in the middle of the billing cycle, rather than waiting for the end. (To be clear, this is not the same as credit cycling, as consumers don’t pay their balances early to spend more than their allotted credits.)
This will lower consumer credit usage and help you increase your credit score. This is because card balances are generally only reported to the Credit Bureau at the end of the monthly billing cycle.
“It can be a good way to improve your score, especially if you use a lot of cards,” he said.
