- Home
- Hack...
Hack Your Credit Card Rewards With Credit Cycling
One of the big advantages of owning a credit card is the ability to accumulate points that can be redeemed for rewards later on.
Many credit card holders might already know the best practises to maximise their points gain, be it withtravel cards, orloans. However, there are also some less known hacks to help you increase your points gain as well.
What is credit cycling
Each credit card is assigned a credit limit. This is basically the amount a lender is willing to lend you. Credit limits can be affected by a number of different things, such as your income, DSR, and so on.
Conventionally, you will spend up to that amount each billing cycle on your card and then pay it off at the end of the month.
Credit cycling occurs when you max out your credit card, pay it off and then make more charges several times in a single statement period. In a way, you are artificially increasing your credit card limit by hitting the credit limit several times within the same billing period.
This works because your credit limit is not a monthly limit. It is just how much you can charge to the card at any given time. So, off what you owe resets the amount – regardless of the amount of time left in your billing cycle.
The benefits of cycling credit
There can be any number of reasons as to why you might want to cycle your credit card. By doing so, you can reach certain financial goals, and for others, it might be a necessity under certain circumstances.
For example, you may have to pay for a medical bill that is above your current credit limit. You can cycle your credit and pay the bill in increments until you zero your debt.
Overcome low credit limit.If you have a very low credit limit, credit cycling can help you pay for essentials throughout the month that you otherwise would not have been able to pay using your card because of the small credit line.
Optimise credit card rewards.For those seeking to cash in on their credit card sign-up bonuses more quickly, credit card cycling can help them do so. For example, if your starting credit limit is RM1,000 but your sign-up bonus requires you to spend RM5,000, cycling your credit card will help you get to RM5,000 sooner instead of the minimum five months. Rewards optimisers might also cycle their credit to earn more points, miles or cash back.
The risks of cycling credit
While credit cycling has many benefits, there is a good reason as to why banks assign you a credit limit. So you can see why circumventing that limit repeatedly could potentially cause some issues.
To reiterate, issuers assign card holders a certain credit limit based on income and payment history, and other factors. Issuers take on risk whenever they issue someone credit. The total credit limit that they assign to you reflects the amount of risk that they are willing to take with your account.
Risk of suspended credit line or account closure.By cycling your credit, you can spend outside of your assigned credit limit. However, this kind of behaviour can make issuers feel uncomfortable, since you are borrowing a lot more money than the issuer believes that you can realistically pay back. This may lead to issuers taking actions such as closing the account to avoid losses on their end.
Impact on credit score.Credit cycling could also potentially have a negative effect on your credit score. This also depends on when your card issuer reports to the crest bureaus. Credit utilisation (or debt service ratio) is one of the big factors that determines your credit score.
Charges may be imposed.If the issuing bank chose to treat it as using the ‘over the limit’ facility, there may be charges imposed. Other banks may charge based on a percentage of the amount over your approved card limit.
Generally speaking, the lower your credit utilisation rate, the better your credit score. If you did not manage to pay your balance back down by the time your statement closes, the credit bureaus are going to see a maxed out card on your account, which could result in a drop in credit score.
Alternatives to credit cycling
The core principle of credit cycling is to artificially increase your credit limit. However, there are other alternatives that you can look at to increase your spending power. These include:
- Requesting and increase to your line of credit
- Getting another credit card
- Move credit limits between cards (Though this method only works if you have multiple cards with the same issuer)
While some may be able to cycle their credit without issue repeatedly, others have faced shutdowns or had their bank accounts suspended. Ultimately, the amount of credit cycling that a credit issuer tolerates varies from one institution to another.
Keep in mind that banks can also change their policies as well. This means that something you have been doing for many months, or even years, could suddenly be disallowed according to the new terms and conditions of your credit card. If you want to stay on the safe side to avoid getting your card shut down, you may want to avoid repeated cycling of your credit limit.
Read More:Understanding Credit Card Payments; Which One Should You Pay?
The post Hack Your Credit Card Rewards With Credit Cycling appeared first on iMoney Malaysia.
- https://www.msn.com/en-my/money/personalfinance/hack-your-credit-card-rewards-with-credit-cycling/ar-BB1odF1j?ocid=00000000
Related
Mah Sing buys RM108 mil land in Taman Desa with estimated GDV of RM1.01 bil
KUALA LUMPUR (July 3): Mah Sing Group Bhd (KL:MAHSING) is acquiring land in Taman Desa, Kuala Lumpur for RM108 million which will be developed into serviced apartments and residential projects. The planned development is estimated to have a gross development value of RM1.01 billion. Mah Sing plans to develop the land in two phases, the first being 1,600 serviced apartments spread over 3.7 acres dubbed as M Aspira and the second phase, Residensi...
MoneyMRT Corp's accumulated losses hit RM57.6b as MRT1, MRT2 failed to meet ridership, frequency targets — AG's Report
KUALA LUMPUR (July 4): The Mass Rapid Transit Line 1 (MRT1) and MRT2 have failed to meet their targets for daily ridership. They also failed to meet the targeted numbers of trains in operation, and peak-hour frequency, according to the 2024 Auditor General's Report. For MRT1, also known as the Kajang Line, the average daily passenger rate ranged from 10.8% to 37.4% from the start of its full operation in 2017 until 2023, falling short of...
MoneyCourt: 1MDB, SRC’s US$346 mil claim against Rosmah may rise as HK, US and UK investigations pending
This article first appeared in The Edge Malaysia Weekly on June 24, 2024 - June 30, 2024 THE list of jewellery and luxury goods worth US$346.01 million (RM1.632 billion), allegedly purchased using misappropriated funds of 1Malaysia Development Bhd (1MDB) and its subsidiaries, is not exhaustive and may be amended to include subsequent items as investigations are still pending, the companies said in their lawsuit against Datin Seri Rosmah Mansor....
MoneyPecca Group ‘hungry’ for more acquisitions as it shifts into higher gear
This article first appeared in The Edge Malaysia Weekly on June 24, 2024 - June 30, 2024 PECCA Group Bhd (KL:PECCA) is back on the acquisition trail after a pause due to the Covid-19 crisis. The automotive upholstery maker has concluded one takeover deal in the past year and is on the hunt for more acquisitions as part of its ambitions to become a Tier-1 automotive player, its CEO Foo Ken Nee says. Foo tells The Edge in an interview that there...
MoneyGenting’s energy ventures yet to excite investors
This article first appeared in The Edge Malaysia Weekly on June 24, 2024 - June 30, 2024 TO some, Genting Bhd’s (KL:GENTING) announcement of its RM5 billion energy ventures last week seemed to have come out of the blue. But to others, the announcement comes at a time when the gaming business is becoming more competitive than it was 50 years ago, when Genting first established its hilltop casino and resort in Pahang. The conglomerate, synonymous...
MoneyManulife 2023 net profit up 11% to RM83.9 million
KUALA LUMPUR (July 2): Manulife Holdings Bhd (KL:MANULFE ) net profit for 2023 rose 11% to RM83.9 million, driven by insurance service revenues with higher contractual service margin amortisation and risk adjustment release, attributable to expansion of insurance in-force business. In a statement on Tuesday, the financial services provider said total assets stood at RM7 billion as of December 2023. Manulife group CEO Vibha Coburn said the...
MoneyHigh Court tosses out Najib's bid to serve sentence under house arrest
KUALA LUMPUR (July 3): The High Court on Wednesday dismissed former prime minister Datuk Seri Najib Razak's bid to serve the remainder of his sentence under house arrest. All the affidavits filed — two by Najib, one by Deputy Prime Minister Datuk Seri Dr Ahmad Zahid Hamidi and Pahang Menteri Besar Datuk Seri Wan Rosdy Wan Ismail — are mere hearsay, judge Datuk Amarjeet Singh Serjit Singh said. The Pardons Board was represented by senior federal...
MoneyBrokers demand cash upfront from investors for these stocks
KUALA LUMPUR (July 1): Brokers are demanding cash upfront for the purchase of several stocks, namely Artroniq Bhd (KL:ARTRONIQ) and its warrant Artroniq-WA, APB Resources Bhd (KL:APB), Notion VTec Bhd (KL:NOTION) and its warrant Notion-WD, as well as YNH Property Bhd (KL:YNH). “Effective June 28, there will be a suspension of share buying for the following counters: Artroniq, Artroniq-WA, APB, Notion, Notion-WD,” Apex Securities informed its...
Money