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Old 11-09-2011, 10:29 PM   #1
jeremy_283 [OP] jeremy_283 is offline
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Credit Card credit limit question

If a person likes to make every single one of their purchases with a credit card due to cash back rewards and they pay their bill in full every month. Let's say it's a $2000 credit limit yet one month they make $3000 in purchases with the credit card but they make an advanced payment of $1500 mid month on the current balance of $1800 to avoid going over their credit limit. What is this viewed as? Would the said person have gone over their credit limit since their total purchases for the bill cycle was greater than their credit limit or will it be viewed as they had an $1800 loan (credit) and they made a payment of $1500 before end of cycle bringing the total to $300 then they spent $1200 more which brought the total balance at the end of the cycle to $1500. Just curious as to a good credit score is important to me.
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Old 11-09-2011, 10:37 PM   #2
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Making your payments, and not missing a payment is what improves your credit score.

You don't even half to pay the full amount, just as long you at least make the minimum payment each time your bill is due reflects well on your credit score.

The amount you decide to pay, paying before the bill is due, or paying off the entire principle each month is just your money management skills, and from my experience, is neutral to your credit score (Does not improve or negate).

As your credit builds, then you gain the trust of credit companies which would entice them to send you lower interest credit cards, preapprove you for loans, points, miles, etc...
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Old 11-09-2011, 10:39 PM   #3
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I believe your credit limit, is your credit limit, so you cannot pay the 1500 you are talking about in advance so to speak, and spend 3000 on the card.
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Old 11-09-2011, 10:46 PM   #6
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from what i know... for the best credit you dont want to spend over 40% of your credit limit
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Old 11-09-2011, 10:49 PM   #7
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Quote:
Originally Posted by jeremy_283 View Post
So does going over a credit card's credit limit hurt a persons credit score as long as they make the minimum payment at the end of the billing cycle?
Going over the limit will not be good. Never exceed the limit. However, if your bank (and most do) credit the payment at the time of receipt, then that amount is restored to the limit. The total spent on the card is not cumulative toward a monthly amount. Your limit is ALWAYS the limit, at no time can you exceed it at one time. In theory, you could spend $2000 today, pay the bill tomorrow, and as soon as it is credited, spend $2000 again.

That said, every credit card and company has different rules, so consult your own terms and conditions.

Also note, if you can pay the full amount, you are better off. Most credit cards report monthly to the agencies. So if you had a $10 balance last month, and this month you have a $2000 balance, it will have an affect on your credit score. HOWEVER, once you pay that off, it will also have an affect. I have noticed $500 balance will lower my score a few points, then it will come back up the next month when I pay it off.
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Old 11-09-2011, 10:49 PM   #8
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Your credit limit is the amount of credit (or money loaned) you can draw at one time. So, if you don't have more than 2000 on there (which you don't, or you'd go over your limit and the transaction would have been declined), it doesn't matter how much you charge up and pay off in a month, week, day or hour.
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Old 11-09-2011, 10:52 PM   #9
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Im not sure I understand what you are asking. You want to make a purchase that would put you over your credit limit and then pay a large portion of it off before the end of the billing cycle?

I think that would still be seen as exceeding your credit limit
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Old 11-09-2011, 11:01 PM   #10
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Quote:
Originally Posted by jeremy_283 View Post
Credit is like a temporary loan on money right? And if your credit card company allows payments at any time of the month and you pay in the middle of the month the $1500 then you never went over the "credited" limit? Is what I thought?
I have done this before. I contacted the credit card company and made an advance payment of 10k so that I could then use the credit card to pay tuition and get the miles. (Also did the same w/ my sisters tuition to get additional miles)

Don't quote me on this, but credit agency's shouldn't be able to see how you use you card, just if you "default" or fail to make a payment, and at the end of the billing period how much of your credit is utilized (this number of utilization is not always reported at the end of a billing period and may be reported to the credit bereaus at anytime.)

Or at least that how it was explained to me. I use my card as a convenience and never miss a payment. If because one month I spend close to the credit limit and my score drops a few points I don't mind too much as this has a minimal impact + the gain in miles --> free annual trip home to South Africa makes it worth it.

EDIT: Never during this whole time did I go over the credit limit, it showed up on my account ahead of making the payment as having a balance of -10k, same as a a return to store would show up.
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Old 11-09-2011, 11:04 PM   #11
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Just don't do what I did. My credit card has no limit

Gotta love American Express (Executive business account )


Oddly enough I have NEVER gotten myself into any trouble with it. Then again, I'm good when it comes to how I spend and manage my $$$.
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Old 11-09-2011, 11:05 PM   #12
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Well I don't know about ^^^a but Capital One wont let you pay more than 10% of your current bill over... so you couldn't just have credit hanging out in there
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Old 11-09-2011, 11:17 PM   #13
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Quote:
Originally Posted by memario1214 View Post
Well I don't know about ^^^a but Capital One wont let you pay more than 10% of your current bill over... so you couldn't just have credit hanging out in there
My card has the same thing preventing an over payment, I had to actually call them and send them a check to make the advance payment.

But with regards to what he is asking, if he spends 1500 and then pays it off, his credit limit is back to what it originally was. What will get reported to the Credit bereau is the utilization at the time that the report is made, like instant MPG, what ever the utilization is at that point. So if your credit limit is 2000 at that point when the report is made and your balance is 1500, your utilization is 75% that is the number that gets reported even though over the course of the month you used the card for say 4500 in purchases, not how you have used the card over the past month.

When you log into your account, it should tell you what your credit limit is at any given time, once the payment clears, your remaining credit should go up by the value of the payment.
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