I’m coming off the heels of a pretty productive couple of months in terms of manufactured spending, followed by a vacation (sort of). While I really cranked up the numbers at the end of last year, I’ve slowed down and will likely keep my numbers to $25,000 per month or less going forward. It’s just all I can handle consistently without losing my mind. While I’ve shared my tips for keeping track of manufactured spending and mistakes to avoid while gift card churning, I’ve never address how large amounts of manufactured spending may affect your credit. Having had a few set-backs recently, I think it’s important to share the dangers involved in manufactured spending and how to ensure you don’t end up destroying your credit in the process.
As many of you know, I got my Barclay credit card accounts shut down in December. I checked into the Conrad Dubai with my Barclay Arrival Plus MasterCard, and by check-out I found out all of my Barclay credit cards were closed…along with those belonging to my family members. I had been churning gift cards very heavily on the Arrival cards. It was probably a combination of cycling my credit line too many times, spending more than my annual income, and using Walmart Bill Pay that caused the shut-down. In any case, I’m lucky that it wasn’t a major bank like Chase or Amex that shut us all down – if that had happened, I know it would have lead to a bigger credit hit because we would have lost some of our oldest and biggest credit lines.
When you’re using credit cards for manufactured spending, be sure to take into consideration how a shut-down might impact your credit. The last thing you want is to lose one or more of your oldest credit lines and end up with substantial credit damage. Don’t get too carried away and be aware of how your credit may be impacted by a shut-down.
Another thing to be aware of with manufactured spending is keeping your credit card utilization rate low. Generally, it’s best to keep it under 30%. That being said, I personally make an effort to pay off my credit cards entirely before the statement closing date. Not doing this would increase my utilization rate, which can set off a red flag to lenders. If you’re using credit cards for high-volume manufactured spending, you run the risk of negatively impacting your credit if your balance is too high after the statement closing date. It’s tough to liquidate gift cards in a timely manner if you’re churning in high volumes, but you should really time it so that your balances are paid off before the statement closing date so that your credit card utilization rate remains low.
Keep your credit utilization rate low by paying off your credit cards before the statement closing date, be aware of activities that could lead to a credit card shut-down, and try your best to avoid it. Good credit is worth more than a 2-week vacation or a few thousand dollars cash back. The last thing you want is to ruin it for something short-term and end up on the hook financially when you try to purchase a home or finance a car. Use your credit cards responsibly while gift card churning and you won’t have any problems (that you can’t handle).
Has your credit ever been negatively impacted by manufactured spending? Please share in the comment section.