How to Lower your Credit Card Utilisation

We all love shopping using our credit cards but the problem is that this payment option comes with some limits attached to it. Therefore we need to always control our spending behavior in order to continue enjoying the benefits which comes along with maintaining a good expenditure pattern. That is the percentage amount of our credit card balance we use should be way lower than that which is available.

For example, if we have a $10 000 credit limit on one of our card, we have to make it certain that we won’t spend more than this figure. At least we should spend only 30% of it, which amounts to only $3000.

But the question is how can we successfully utilize our credit card balances? Should we completely abandon spending?

No. There are certain alternatives available, which we can use to make us enjoy our money, while at the same time we avoid crossing the red line. Let’s find out more below. Track your credit card spending The simplest way to make sure that you won’t exceed your credit card limit is to keep watch of your accounts all the time. Whenever you spend your credit, always check the balance left and calculate the card’s utilization ratio. You can do that by dividing the total balance by the total limit you were given for your card. You have to express the value you get as a percentage in order to understand your card’s utilization ratio. For instance, a $100 credit card charge implies 10 percent of a $1000 credit card limit. Additionally, if you have other forms of payment available at your disposal use them and save your credit card balance(s). Also, avoid purchasing unnecessary things using your credit card. Request for more credit It is not that easy to remain within your credit card utilization ratio limit before the month ends. So it is better for you to simply ask for a credit line increase from your card issuer. Imagine that your credit limit is pegged at $15 000, and you are utilizing about 50% of it every month (that’s $7 500), then your card issuer later agrees to increase your limit from that amount up to $20 000. Your card utilization ratio will also decrease to 37.5%, which is the same amount you were spending in the previous months, meaning your credit score will be increased significantly.

However, you might experience a short term credit score surge, as your card issuer can make a hard inquiry on your credit reports. Use different cards for your monthly purchases Instead of piling up pressure on one credit card, while raising its utilization levels to unprecedented amounts, it is good to use various credit cards whenever you do shopping. This will spread your charges across all of them and your utilization rates will definitely fall. Nevertheless, this trick cannot work when there are credit scoring models in place, which monitors your credit card spending patterns in overall terms.

Repay your credit charges two times a month This is another best way for you to keep your card utilization ratio as low as possible. When you pay your credit cards mid-cycle, you won’t risk exceeding your credit limit even if you use your cards throughout the entire month.

Be in the know of when your card issuer makes reports about your expenditures to the bureaus

It is wise to call your card issuer and understand the dates when your credit balance will be due, and when such reports will be send to the authorities. Now, mark that date and quickly sort out your accounts to make sure they will be in good state before the reports are made. Having a high card utilization ratio by the time the issuer makes a report to the bureaus affects your credit score line negatively.

Conclusion

Maintaining a good credit card utilization ratio is good for you because that can improve your credit score line. As a result, you will enjoy more benefits in the long run like having access to more money during emergency times, more chances of getting cash-back rewards for all purchases you make during the month, travel plan assistance, road-side assistance services among many others. On the other hand your credit score line will be in the mud when you fail to control it in good sense.

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