Wait, Is Credit Cycling Actually Risky?!

I also pay my estimated quarterly taxes and final tax payments doing this and have never had any issues. Seems like as long as you pay your bill and your total spend doesn't exceed your limit, one should be OK. Never heard of anyone having any problems doing this.

I doubt this can be an issue as it’s fairly common for younger business travelers to pay their CC bills as their expense report checks post so they don’t breach their CC limits.

I could see it as an issue for banks as their risk increases, remember chargebacks can still occur even if you paid off the balance although the balance is paid off it skews their risk money. So could see it as spending “risked money” which they wouldn’t wanted to

I do this at least 4 times a year when I pay my taxes. Never heard anything negative from my issuers.

Has anyone else?

Speculation: Cycling via foreign "charities" or offshore entities may attract more attention than paying for biz travel or taxes.

Life must be so hard in then US given all then things you guys need to worry about. I imagine one needs to constantly watch their backs to keep from getting screwed over by some big corporation since you dont have any real consumer protection over there.

Credit cycling is a risk factor, yes - though having a mature/aged account will typically keep you from getting into trouble.

The typical risk factor from the bank's perspective is that ACH transactions can actually be returned up to 90 days later. So whereas a "normal" non-cycled account has a risk exposure to the bank of the credit limit they've extended to you, cycling increases that exposure by some multiple.

For instance, a common fraud involves someone maxing out and paying down a card multiple times in a statement cycle, then getting all the bill payments returned such that the bank loses (say) 5 times the credit limit.

If you cycle heavily, banks that specialize in handling large-volume transactions (eg Amex) will typically start to require payments by wire transfer, which is non-returnable, to prevent this.

Ask Benjy over at MtM whether cycling is risky.

I have to do this on particular UK card for which I have an inexplicably low limit. Otherwise I won't hit their spend requirements for a voucher. I feel if they didn't want it to happen they could easily stop it from occurring, so it mustn't be a big issue

I had to buy and new furnace and ac a few years back. I wanted to put it on my AMEX card. My credit limit did not cover the total cost. I called AMEX and they told me to do this or make a payment to them for the entire cost in advance and that would effectively extend my credit limit, I did not sense at all they were concerned I would do this. I did the credit cycling option and never heard from them about it.

I mean financial security is malleable. Even the wealthy can take an unforeseen hit. So from the perspective of the bank or lender, it makes total sense that sudden large expenditures that max the limit—no matter how they get paid off—indicate potentially increased liability ahead. If I'm the bank, or its algorithm or whatnot, the customer behavior I'm looking for is: large purchase > request credit limit increase > large purchase > large purchase. Rather than cycling.

I did this with a PayPal card issued by Syncrony Bank. I made several payments during the same billing cycle to keep my balance down. Then I noticed Syncrony Bank was not crediting the payments against my credit maximum. I paid my balance down to $0 but had no credit available on the card. The card had a $15,000 credit limit. Just dumb.

If you never exceeded your credit limit, then it's not a problem.

Like with most things in the credit card/points & mile world, in moderation you are probably fine. Like buying an occasional gift card from a grocery store with your Amex Gold. Cycling your credit a couple times a year will not get you shut down by Chase, Amex, etc. Doing it multiple times every month...I wouldn't.

I recently received a retention offer from Citi for 2 extra TYP per dollar on one of my Custom Cash cards, up to 35k extra points in 6 months ($17500 spend). The card only had a $2k limit, so the first couple months I cycled my credit. Then they just increased my credit limit without asking me. So yeah, they didn't seem to mind.

Banks probably also frown on people paying their balance in full every month too. They would much prefer if you run a big balance, (or even a smaller balance) into the next billing cycle so they can hit you up for 31% interest.

Never had a problem here in the UK but I know some friends in China and Singapore have encountered issues and sanctions were applied by the issuing credit card company unfortunately also had their linked airline frequent flyer accounts terminated.

I imagine one concern from banks is people gaming rewards cards by finding something to purchase that can reliably be turned back into cash to pay off the card. In Ye Olde Days, people found various exploits to do this, but the loopholes are largely gone by now. I can't imagine banks caring if people cycle credit for sporadic large purchases, like taxes, cruises, or the like.

Manufactured spending is still going strong.

Credit cycling is definitely a problem. The level of "being a problem" differs by bank, but some banks will close your accounts even if you never exceed your limit.

I ran into this on my first Ch Ink Pref since the CL was too low. I called up the customer service folks and was told as long as I didn't do what was stated in the article (use all the CL, pay it off, then run it up again), that I'd be ok. I ended up paying off the balance each week and my main concern was my credit score, not trying to get more CL out of the card than I had.

Synchrony is famous for this and this is why some people avoid them.

I do this often when opening new cards for intial signup bonus, when credit limit is lower then bonus spend requirement. Don't want to wait for statement to close, to get bonus points.
Never had any issues with bank. Mostly Chase.

Oh those scary big corporations. What a sad life you must have, constantly seeing hobgoblins everywhere. Don't worry, your omnipotent government will protect you. Personally, I'd rather be screwed over by a big corporation than by an overbearing government. You can take your business elsewhere when a corporation screws you...a government, not so much.

I often exceed the monthly limit in a sense when on extended holidays and want to use a Hilton card
To avoid this issue I first predict my spend and pre-pay enough so the amount owed never reaches the limit ever.
With a dumb limit of $10K and anticipation of spending $12K I will pre-pay $5K.
Never had a problem.
Most of my cards have $30K or more but my new AMEX thinks I'm a new customer.

I certainly did very recently encounter a problem with this practice on an AAA Comenity Visa card. (The AAA Comenity Visa card is a “free” credit card available to AAA members. It has great cash-back features including 5% on gasoline and vehicle charging and 3% on travel, grocery, and restaurant expenses.)

The only disadvantage is that the credit limits are fairly low, about 25% or less of what some of my other cards, including AMEX, provide. They don't query about income!

I encountered the problem when I needed to pay an upcoming cruise bill (which would give me 3% back) that was about 2.5x my credit limit on that card. I paid via that card in multiple installments, following each installment with a complete, out-of-cycle payment directly from my bank account to AAA Comenity to allegedly fully restore my credit limit. What I found was that although my account showed my full account credit limit being fully available, AAA Comenity started refusing all, including small (<$100) charges. It took two weeks of no attempted charges before my ability to use the card was restored. In speaking with an “alleged” service manager at AAA Comenity, they couldn't or wouldn't explain why they put such holds on an account with zero balance!

To make matters worse, they reported this to the credit bureaus and I saw my credit rating go down by over 35 points.

So so answer your question, at least some credit card providers not only frown on the practice, but actually take revenge on its use …

I only credit cycle during tax season. I usually have a 100k+ tax bill and need to credit cycle a couple of times. But overall, never had an issue in all these years. I have done this with chase and capital one. My credit score is 830-845.

Wow, I had never come across this terminology before but I’ve certainly done it many times without realizing on my low-limit cards (including BILT lol).

Interesting.

This is a great explanation, thank you.

Banks vary when your credit utilization during a statement cycle is reported. I would imagine if your utilization on a CL is normally small except for the day you max it out is a big red flag.

I'm very surprised you didn't know about this Ben, given your line of work... It's pretty well known in the card churning communities and yes, some banks will flag you and even shut you down for doing that to a certain extent (like Chase).

I have done this frequently, to the tune of $50k+ over a few months, and it hasn’t been an issue, but I’m also well established with my bank so they know I’m good for it, I guess?

I never had an issue like this although if I have a lot of expenses on a new card that I am going for a signup bonus on its not unusual for me to nearly max the card pay it off and charge a whole lot more in same cycle. I don't believe banks care about that if you only do it once in awhile. I have heard of people having issues when they repeatedly engage in that behavior over a period of months. It could be a flag that they are engaged in some sort of manufactured spending and not legitimate spending. Also, it can be a sign that they may be in some sort of economic distress and basically moving money around month to month. In my experience if you have legitimate spend that brings you up near the credit limit and pay it down and its not something that happens every month or every other month the most likely outcome will be a credit line increase if your profile supports it.

Banks frown on it when's its Manufacture spending. If you're buying thousands of dollars from big brand name companies they don't care I have done multiple times. Chase might throttle you by making payments take a full 3 biz days to clear even when from a chase checking account. Amex had no care and they welcomed and love prepaid before the charges were even performed.

I would take the view that if it's constant, it might be an issue. But if it is infrequent and tied up with a low limit on a new card and/or something "obvious" like paying taxes or some short-term offer and not obvious MS, it is less likely to be an issue.

Put differently, double-cycling in March where most of that is to the IRS and your state (and where you're only using a fraction of your total available credit, just using a single line a lot) is probably less of an issue than quadruple cycling with gift card purchases.

Yes, but a lot of the more "lucrative" versions are gone (e.g. buying crates of dollar coins and then returning them).

Doing this once in a while, with no other patterns of suspicious activity, isn't normally an issue. The issues come when you're doing it frequently and, as you mentioned, appear to be moving $$$ far above your means. It's one of the patterns that banks must legally monitor for potential money laundering.

Can you please provide this "article" or better a link. TIA.

Does charging the taxes pencil out once you factor in the 1.82% fee (or whatever it is)? I’ve thought about doing this with C1 VX since you get 2x points, but the spread is low enough that it didn’t seem worthwhile

Would this not also affect your credit limit? You are temporarily maxed out before you pay it off and that depends on how fast you pay it off. I know with AMEX based on other people’s feedback that they charged 80 percent of their bills to AMEX for that billing cycle and paid it off when the statement came but AMEX reduced their credit limit by 80 percent. It took a while but they got their previous credit limit back and even a higher than before credit limit. This was done by AMEX as they didn’t ask for an increased credit limit. It was probably because they did not charge as much on their AMEX card to avoid this issue again.

Well, twice i've had a capital one card with a high spend SUB like $30-$50k in 3 months.... with a $5k credit limit that they won't budge on. At that point either cycling is permitted or it's fraud (false advertising), no?

"If I'm the bank, or its algorithm or whatnot, the customer behavior I'm looking for is: large purchase > request credit limit increase > large purchase > large purchase. Rather than cycling."

... Which is very stupid because it's less risky for the bank if the customer has the money to pay off their charges (and does so) rather than the bank extending more credit without the customer paying anything off.

Don't worry Mantis the US government is just as bad, if not worse. Ever hear of the IRS? For example, the US is the only country that taxes citizens on their worldwide non-US income even if you haven't stepped foot in the US for the past 30 years. That's why many Americans renounce their citizenship every year!

How cute is it that Mantis has actually fallen for the illusion of choice that corporations work so hard to create. Try, for example, to map out where the food you eat in a day comes from all the way down the supply chain and you'll see what I mean.

Using a 2x points card and valuing the points at 1.5 cents each (a pretty lowball valuation for someone who transfers to partners), you effectively get ~$3,000 worth of points for $1,820. Or you could just use a 2% cash back card and get ~$180 in free money.

Huh? This article. You know, the one these comments are attached to.

I had no idea it was an issue/ potential issue, but I did it a lot earlier this year. I was doing a house renovation. I have two Citi cards from AA with limits around $25k but my renovation was a lot more, of course. I routinely charged items, paid them off, then charged more, during the 3 month renovation. Certainly more than the limit each month. Once the renovation was completed I reverted to my normal spending patterns. No issues, and the spend certainly elevated my AA status!

Never knew this could be an issue. I'm new to the US and have no credit rating despite having decent income so was stuck on a card with a $4.5k limit. Spent ~$30k a month on it. Didn't seem to have an issue.

@Ben--Is "frown down" an American expression? I've only heard "frown on it" before.

When Chase issues a card to a cardholder with a young credit history and issues a $500 initial credit limit, they have to expect people to credit cycle. A $500 CL is an absolute joke. I understand they're testing out creditworthiness, but start with at least $1k. To me, they're asking for it in this example and it should be 100% fine with them. You're not going over the CL and still well below reported income.

Why not just spend the money you have and then you don't need to worry about your credit and what the bank thinks of you, like the most of the world does? I get people lending money when they can't cover basic needs but that doesn't seem to be Ben's case.

Some banks mind more than others .
Citi is a big no no (especially on certain cards)
Chase is an issue too
Amex is total fine
Etc

What's the point of this comment? Does it make you feel better to judgy, ill-informed comments? This site is specifically about maximizing credit card rewards, if that doesn't appeal to you that's fine, you can shut up and move along, there is absolutely nothing of benefit to this site from your comment, and no one here is getting anything out of you being here, so take your miserable self elsewhere, it's really that simple. Is there some reason you thought the world would benefit from hearing what you had to think?

Could that bed the least relevant picture in any blog post here?

Once or twice on my Citi Double Cash card I have maxed it out and then paid it off, but my available credit did not return to my credit limit until the end of my billing period. In effect forcing me to only spend my credit limit. This doesn't always happen, and has only happened a couple of times at the very beginning.

I'm a heavy citi double cash cycler with an insatiable need for citi points for LHW & Preferred hotel stays.
This is my experience thus far:
1. our family has four DC cards. $41k, $16k, $11k, $3k spread across three users in my family. Two cards are 5 years old, one is 2ish years old and the $3k card is approx 3 months old (mother in law). My & my wife's card relationship with citi goes back to the 1990s.
2. approx five months ago i took over paying business expenses for my son's company. approx $400k per month. 100% of spending is regular every day organic business spend to run & maintain 5k apartments. no taxes, gift cards, etc etc.
3. each DC card gets cycled many 3-10 times per month. when i pay off the card via normal checking ach, my credit line will take 2-12 days to come back but when i pay with my chase atm debit card, it comes back instantly. Chase's atm card max is $25k per day so this is my hard cap. Overflow goes onto amex blue biz cards then cap one biz vx.
4. perhaps twice per month the citi fraud department asks me to call to verify some charges but not once did a representative object to my activity. One time i asked the rep to review my activity and tell me if i am running any risk of getting shut down. This guy even asked a manager of some sort and the answer was no and was told "this is the type of activity citi should be encouraging"
So far so good, fingers crossed!!