Is unnecessary use of credit card good?

oj.bulmer

Hi,

I have a credit limit which is way above my monthly expenditure. Since I lead a simple lifestyle, my salary suffices for all bills and subsequent savings. But since I have read somewhere that using credit card regularly is good, I typically use my credit card for all my expenditure/shopping, and keep the salary in the savings account that earns me interest. In a typical month, thus my borrowing goes to upto £400 etc which I pay off in full every month.

Am I using my credit card correctly? If I use my credit card sparingly and keep using my bank balance to pay my bills, my credit card balance will be smaller, would that be good for my credit history?

Thanks

[Deleted User]

You're using it fine. Even better if it's a rewards/cashback card.

InsideInsurance

oj.bulmer wrote: »

Am I using my credit card correctly? If I use my credit card sparingly and keep using my bank balance to pay my bills, my credit card balance will be smaller, would that be good for my credit history?

Your history is simply that, there are a few things that are definitely bad, eg defaults, but many other things are much more subjective and have to be taken into context with your wider circumstances.

So for example, if you are spending £900 a month and paying it off in full is that good or bad? Well if your limit is £1,000 and you earn £1,100 a month then its probably not too good as you;ve a 90% utilisation rate of your credit and spending a massive proportion of your salary a month on servicing debt.

On the flip side if you have a £900 a month spend paid off in full each month but have a £9,000 limit and a £3,500 a month salary then its good as you've a low utilisation rate and appear to be living within your means.


Outside of credit history obviously the main benefits are getting 1% cashback or collecting airmiles etc -v- spending on a debit card that gets you nothing

stator

It sounds good, if you just use it for stuff you would buy anyway and pay it off every month.
However if you have a credit limit that is too high for your needs and too high for your possible future needs then I would get it reduced.
If you wanted to apply for a loan or car finance or anything the high credit limit might be a problem as it will count against your total possible borrowing.
Also if your card was stolen it limits the amount they could steal. You wouldn't be liable for the losses but it might be less hassle if it's got a smaller limit.

InsideInsurance

stator wrote: »

If you wanted to apply for a loan or car finance or anything the high credit limit might be a problem as it will count against your total possible borrowing.

It also counts for you as it shows other lenders are trusting you with big limits.

The affordability question raised by the high limit depends on your income and other financial commitments. I wont ever use the level of limits I have on my cards but at the same time I wont ever have affordability questions raised as the payments to service even maxed out cards would be relatively small to my income.

PeacefulWaters

Carry on as you are.

Get a credit card that pays you to use it.