Experts Warn of Little-Known Credit Card Practice That May Jeopardize Accounts

Consumers who repeatedly max out and repay credit cards to increase spending power may face account closures and credit score damage, analysts caution.

Financial experts are sounding the alarm on a credit card practice known as “credit cycling,” warning that the under-the-radar behavior could have serious consequences for consumers. The technique involves repeatedly hitting a card’s credit limit and then quickly paying down the balance to continue spending beyond the assigned limit.

Man in front of a laptop with a credit card in his hand | Source: Pexels

While it may appear as a strategy to stretch purchasing power or accelerate reward points, experts caution that card issuers view credit cycling as risky. “You have to be very careful,” said Bruce McClary, senior vice president at the National Foundation for Credit Counseling. “If there’s even the slightest chance credit cycling can go sideways, it’s best not to do it and look for alternatives.”

Ted Rossman, senior industry analyst at CreditCards.com, compared occasional use of credit cycling to driving slightly over the speed limit. However, he emphasized that frequent use may be seen by lenders as financial distress or even suspicious activity. “You could be putting yourself at risk by appearing to be a risk in that way,” McClary added.

Card issuers may respond by closing accounts and revoking reward points. Such closures can lower a consumer’s total available credit, increasing their credit utilization rate and damaging their credit score, McClary said. Credit utilization — the ratio of outstanding debt to credit limits — is a key component of credit scores.

Man and woman in front of a laptop with a credit card | Source: Pexels

Instead of credit cycling, experts recommend alternatives such as requesting a higher credit limit, opening an additional card, or spacing out payments across multiple accounts. Rossman also suggests paying down balances early in the billing cycle to improve credit utilization without triggering issuer concerns.

The average U.S. credit card limit stood at $34,000 across all cards by mid-2024, according to Experian.