Credit Card Utilization: Definition, Calculation & How to Fix Credit Spending

Credit Card Utilization
Image Credit: Forbes

Credit Card Utilization, what really is that?

Are you perplexed by the term credit card utilization? Are those statistics and credit statements something complex to comprehend? Do you want to know about the percentage and everything revolving around how to use your credit card? Then this article is for you.

Knowing these terms would go a long way in determining the best actions to ensure a good credit standing and a healthier way to track your spending whenever you use your credit card. 

A thorough explanation of credit card utilization is given in the headings below 

Credit Card Utilization 

Talking about credit card utilization without knowing what a credit card means and how it relates to our percentage knowledge might make this concept tough to grasp. A credit card is the main instrument used to allow the utilization to take place.

What is a Credit Card?

A credit card is a small plastic device that a bank issues, large retail stores, and other business enterprises to allow its customers to access credit facilities and cash within a certain credit limit the card holds, which could be paid for at a later time.

This instrument allows anyone who carries it to enjoy the benefit of buying, borrowing, and utilizing credit facilities, even when such an individual is short on cash. The process is called credit card utilization.

Credit Utilization 

When you take advantage of the amount stipulated in your credit card for transactions and other utilities, what you have indirectly done is known as credit utilization. It is also the total of your spending from your credit card versus the credit limit stated on your card.

Many purposes for credit utilization vary from individual to another, and companies provide various credit limits for their clients/customers; one thing, however, is how to take advantage of credit card utilization without being in the black books of the company providing this service.

Knowing the right way to approach your credit utilization requires you to be disciplined and frugal enough not to fall short of paying back your credit. Knowing about percentages and how to calculate them is a good practice for credit card usage.

What Should My Credit Card Utilization Be?

One’s credit should be relative to a low percentage credit card utilization value, one that would make it easy to access more credit as well as pay up one’s debt on their credit card.

Knowing what your credit card utilization is should demand a practical knowledge of knowing about the percentage and how even to calculate them; the right way to calculate these values would make it way easier to control your spending.

Credit Utilization Calculation 

Calculating credit card utilization mandates you to know the percentage and ratio value. Credit utilization value is expressed in the value of a hundred. What are your total expenses and money spent on your credit card against the credit limit allowed for you to spend?

For example, say you have a credit card, and in it, you are required to spend $1000; if at the end of the stipulated period, you get to spend, say, $500 from the card, the $1000, which is otherwise known as the credit limit when subtracted from what is spent forms your credit utilization calculation.

Your credit card utilization calculation could further be worked out to achieve your utilization percentage; a quick dive into what the percentage would be from the example stated above would be to divide the difference in value between your credit limit and actual spending multiplied by 100, which in this case would give fifty percent.

How to Fix my Credit Spending?

Not having your credit card usage percentage exceed the 30 percent benchmark is just one way to fix your credit utilization, as there are many other ways to do so. Perhaps you are wondering how to go about it; the following points would help:

#1. Avoid closing your account.

The one thing anyone would not be advised to do when it comes to fixing a credit card utilization challenge is to close the credit card account, as this could spell doom for the individual when it comes to accessing credit facilities from other credit/ financial organizations.

By keeping the account active and carrying out transactions, trust is built, and the credit card company may cover your account more easily, seeing your credit card utilization problem being resolved.

#2. Timing one’s payment 

It could be monthly, weekly, or even yearly, whenever your credit card utilization payment comes in timely; this would help prevent and also fix any utilization problem that might arise.

Creating a standing order with the bank on the amount that should be debited monthly in servicing one’s credit card utilization debt informs the card company of clients’ intentions to clear their debt, which could boost your trust of faith when looking for a referral in applying for a loan.

#3. Applying for a loan.

A loan application to fix a credit card problem should be the last resort when sorting out issues, as it could leave an individual with the probability of meeting up with dual debt payments.

However, applying for a personal loan could cushion the effect in that the credit card company isn’t compelled to press legal charges against you in the event of a default, as they would have to wait till the stipulated maturity of the debt.

Best Credit Utilization 

When your credit card utilization is high, it is a signal for you to either cut down on your spending or probably work a way to have your credit limit increased and, in the worse case, look out for a way to remove your credit utilization

From the rough working cited, a fifty percent credit utilization means that the credit card user is utilizing far more than what would naturally put them in good stead when applying for credit shortly and hence should do well to meet the conditions that would put them in the amber. At least thirty percent of your credit limit should be the minimum target.

How to Keep Your Credit Card Utilization Under Thirty Percent?

From requesting another credit card to seeking an increase in credit limit, there are many ways one could keep their credit card under thirty percent, and these include:

#1. Spending for the basic things.

Knowing that your credit card is not a leverage to shop and buy anything in sight impulsively can add to how one can keep their credit card utilization under thirty percent; this is achieved through a very disciplined approach to consciously buy only what is urgent, necessary and currently without cash at the moment to purchase.

#2. Applying a limit to what you would spend.

Aside from the main credit card limit, most credit card features support individuals who wish to further restrict their spending to a certain limit by making them tinker with the settings in their credit card provider’s application or website.

Say your credit threshold is $1000; further breaking down how much to spend and activating the stop once such a limit is achieved can go a long way in having one credit utilization under thirty percent.

#3. Using another credit card 

By using another credit card to spend and make purchases, one can also effectively track and keep their credit card utilization under thirty percent.

An individual having two credit cards could choose only to spend a certain amount on a certain card, after which they could seize spending from that card once the limit they have set for themselves is reached and then use their other credit card to continue purchasing while they clear off the debt accumulated from the first credit card.

#4. Demanding an increased Credit limit.

A preferred, more suitable option, especially if an individual has only a credit, will boost the percentage to below thirty percent of credit card utilization.

Say the credit limit in the first place was $500, and maybe half of this limit has been utilized in making purchases, which would result in a very high credit card utilization percentage; customers could request an increase in the credit card limit, say to $1000 to mitigate the percentage.

Credit Utilization Percentage 

The percentage of the available money spent versus the credit limit is the credit utilization percentage. 

Many credit card users are caught in the divide, knowing if the credit limit stated on their card should be spent completely. While there is no fast rule to utilize the money allotted on the credit card, it is always advisable to check in with a good percentage that could allow for more credit in the long run.

Can I use a Hundred Percent Limit on My Credit Card?

A straight answer would be yes, after all, while placing the credit limit on that if it isn’t to be utilized completely. However, it should be noted that credit companies have a way of testing the spending habits of their customers/clients, hence the need to fall into their good books.

Consider this example; A table is set with a different menu by a host for her guest to choose from; although the liberty to make various selections is valid, any guest who goes about having every single thing on the table on their plate could have themselves not being invited to any table gathering by the guest in feature again.

The scenario above paints a classic picture of what most credit companies aim to achieve when they place credit limits on credit card utilization; think of it as a psychological way to assess their client’s spending habits. So the short answer to the question of using a hundred percent of one’s credit card is a no.

Best Credit Percentage 

As stated earlier, the best way to restrict spending remains to keep spending below thirty percent of one’s credit limit. In this way, one checks his splurge and, at the same time, finds it easier to pay back the credit for a better one.

Questions as to if the thirty percent benchmark should be thoroughly followed remains a bone of contention for some as many still think that even a forty percent credit card is a fair deal in the right; without the buckets, we would deal with these queries and many more in the following headings:

Is Forty Percent Utilization Good?

A forty percent utilization rate on a credit card is a fair deal as long as timely payment is ensured; aside from that, it is best to stick to a lesser value utilization limit.

Ases, when one should have a forty percent credit card utilization could but not be restricted to the following:

  • A very pressing need for cash.
  • Quick purchase to generate income.
  • Health ground and unforeseen contingency.

Nevertheless, a clean slate with less than thirty percent in credit card utilization is worth having than the risk of being denied the facilities in the event of a default.

How can I keep my Credit Limit to Thirty Percent?

To keep your credit utilization to at least thirty percent, follow these three steps:

  • Avoid impulse buying.
  • Pay your credit on time.
  • Apply a restriction limit to your spending.

Anything outside this could have your credit card utilization limit above thirty percent.


It is one thing to enjoy a credit facility; it is another thing to meet up with the payment. Sadly, the rate of defaults when it comes to repaying credit has warranted many credit companies to be stringent in offering this service with very stiff penalties in case of a breach.

Luckily, this article has covered everything you need to know when it comes to understanding credit card utilization and things to know about the percentage; it is believed that with the proper implementation of the tips here, you would not fall prey to being an impulsive buyer and have your name amongst the defaults by your credit firm.

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