Everything You Need to Know About Credit Card Utilization

Woman with laptop and credit card

Credit card utilization refers to how much of your available credit is being used. You can figure out your total credit utilization rate by dividing your total credit card balances by your total credit card limits. For instance, if you have a credit limit of $2,000 and have an unpaid balance of $1,000 on that card, the utilization rate is 50%. The benefits of a low rate include a stronger credit score, greater financial flexibility, and easier payments.

Where Should You Keep Your Credit Card Utilization Rate?

There’s no one golden rule when it comes to credit card utilization, but most experts recommend sticking below 30% for the following reasons:

  • Lower credit utilization rates suggest to creditors and lenders that you use credit responsibly and will be able to pay them back.
  • Staying far from your credit limit makes it very hard to accidentally go over.
  • You won’t be tempted to use all the credit on your card and find yourself in poor financial straits.

While there are many factors affecting your credit score, credit utilization is certainly one to consider; there’s a strong correlation between sensible credit card utilization rates and credit score.

How Can You Improve Your Credit Card Utilization Rate?

By now you should be convinced that keeping to 30% or less is a good idea, so we’ve put together some quick and easy tips to help make it happen.

  • Pay More than Monthly: Credit card networks usually report your credit activity once a month, so you should keep utilization low. Rather than paying the whole amount at the end of the month, make payments from your checking account every week or after making a large purchase.
  • Spread Your Charges: Instead of keeping a high utilization rate on one card, try spreading your credit across several cards.
  • Increase Your Credit: Even if you’ve never reached your card’s credit limit, you might want to consider increasing it. You’ll suddenly improve utilization without spending a dime.
  • Consolidate Your Debt: Close to your credit limit across all cards? Consider taking out an installment loan to pay them off and consolidate debt into one monthly payment instead of several.

Talk to Xpress Cash Today About Consolidating Your Credit Card Debt

If you’re thinking about consolidating your credit card debt, contact Xpress Cash today or visit your nearest branch — you’ll find us across Wisconsin, Idaho, and Michigan.