Are you playing a dangerous game with your credit card by repeatedly maxing it out and paying it off just to spend more?
According to CNBC, a troubling financial trend called "credit cycling" is gaining traction, where consumers hit their credit card limits, quickly pay down the balance, and reuse the available credit to spend beyond their normal means, a practice that experts caution can lead to serious financial repercussions.
Credit cards come with a spending cap that resets each billing cycle if the balance is paid in full and on time.
While occasional credit cycling might not raise eyebrows—akin to a minor traffic violation—consistent "churning" of available credit is a different story.
This habit can trigger penalties from card issuers, including account closure or loss of hard-earned rewards.
Such actions can also dent your credit score, especially if an account closure slashes your overall credit limit and spikes your utilization rate.
Card companies often view frequent credit cycling as a red flag, potentially signaling financial distress or even suspicious activity like money laundering. Closing an account for misuse can make you appear riskier to future lenders, limiting your borrowing options.
Moreover, maxing out a card repeatedly raises the odds of accidentally going over the limit, inviting fees or higher interest rates.
Credit utilization—the ratio of debt to available credit—plays a big role in your credit score, and experts advise keeping it below 30%, ideally under 10%.
If credit cycling leads to a canceled card, your utilization could soar if you carry balances elsewhere, harming your score.
The average American credit limit across all cards stood at about $34,000 in mid-2024, per Experian, though limits vary by generation, income, and usage habits.
Some turn to credit cycling to fund big-ticket items like home repairs or weddings, especially if their limit is low.
Others chase accelerated rewards or points, hoping to game the system for perks—yet, as Bruce McClary, senior vice president at the National Foundation for Credit Counseling, warns, “You could be putting yourself at risk by appearing to be a risk in that way.”
McClary also advises caution, noting, “If there’s even the slightest chance credit cycling can go sideways, it’s best not to do it and look for alternatives.”