I have a rewards card that I use to earn miles. I have developed a habit of using it for every purchase and then paying it off online right away (not even waiting for my billing statement). That way, I’m not stuck with a huge credit card bill each month. Would this practice affect my credit score?
Actually, it’s a great way to use your credit card and doesn’t hurt credit scores at all. In fact, it can help them by showing very strong credit management, and there are several other potential benefits.
The most obvious benefit is taking advantage of any rewards the card offers. As you mention, it’s a great way to accumulate airline miles. People often earn enough miles to cover airfare for a family vacation. Cash back rewards are another possibility.
Less obvious is a financial management benefit. Your monthly billing statement will serve as a record for every purchase you make.
For most people, tracking spending is difficult. They struggle to save because they just don’t know where they are spending their money. Using your credit card for every purchase lets you track your expenses to the penny. You can then identify where you may be able to save, putting you in a stronger financial position.
The only word of caution for many consumers about this approach is that they not overspend. It can be very easy to get carried away with a credit card. You have to be very aware of how much you have spent as the month progresses. If you are tempted to spend more than you can pay at the end of the month, using a credit card for all of your purchases may not be the right approach for you.
Thanks for asking.
- The “Ask Experian” team