TikTok is full of credit card 'hacks' to help improve your credit score, but not all of it is good advice
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- TikTok has easily become one of the most popular social media apps in the last few years.
- There's a plethora of informative content on TikTok including some of the internet's most well-known credit card tips and tricks.
- Much of the advice is sound, but a few of these "hacks" could do more harm than good.
- Check out Insider's guide to the best credit cards.
TikTok, one of the most popular social media platforms currently available, is chock full of goofy, quirky, and informative content that almost anyone can enjoy. Although notorious for its viral dances and trending audios, you can find almost anything on TikTok – even personal finance content.
So I dove headfirst into the credit card tag on TikTok and found the app's most popular "hacks" for credit card experts and novices. While the majority of the posts provided decent tips and tricks, a few of the self-proclaimed hacks were more than a little fishy.
Here's a look at some of the best and worst credit card hacks on TikTok right now.
We're focused here on the rewards and perks that come with each card. These cards won't be worth it if you're paying interest or late fees. When using a credit card, it's important to pay your balance in full each month, make payments on time, and only spend what you can afford to pay.
Combat compound interest by making multiple payments each month
The hack
Rachel Covert (also known as Rachel_talksmoney on TikTok) recommends paying down your credit card balance multiple times a month in order to combat compound interest and prevent accruing more debt.
How it works
Although it's ideal to pay your credit card statement balance in full each month, folks can often find themselves with lingering debt if they can't pay off their entire balance. In order to prevent falling into a hopeless debt spiral, Covert suggests implementing this simple strategy.
In her popular TikTok, Covert explains that card issuers usually apply compound interest to the principal card balance. Compound interest is interest calculated at the end of each day based on your total remaining balance. This means that every day that you carry around existing debt is another day you'll be accruing interest.
Covert's hack to reduce compound interest is simple. "You should be striving to make far more than the minimum payment. If you can make that across two, three, or four payments in any given month, you're helping yourself combat that credit card debt by just reducing the amount of interest that you're gaining every single day," she explains.
Review
Covert provides a simple and reliable strategy for folks looking to get out of credit card debt. Since compound interest is calculated every day, lowering your balance multiple times each month will notably reduce the total amount of interest added to your original balance by the end of that month.
Debt can feel overwhelming, and figuring out when and how much interest you'll be charged (nevertheless why you're charged that amount) can seem helplessly confusing. But making at least two payments every month is one way to responsibly manage your balance.
That said, Covert also suggests that you shouldn't pay off your credit card debt until you have a small emergency fund as it may cause you to put the little bit of debt you just paid off right back on the card.
Depending on your regular expenses and you're current financial situation, this may be worth considering. If you're able to stop charging your credit card until you've paid off all your debt, you may not need an emergency fund. Otherwise, if you're regularly making payments and adding to the balance, building up an emergency fund first may prove beneficial in order to avoid running in circles.
How paying your monthly bills can improve your credit score
The hack
Instead of paying your bills with a debit card, Amanda Smith (thecreditmortician on TikTok) encourages folks to pay their bills with their credit cards instead of cash or debit in order to show banks that they know how to manage their money.
How it works
If you're looking for a simple and responsible way to improve your credit score, Smith made a post explaining how you can take advantage of your credit utilization ratio (which determines about 30% of your FICO score) to help increase your credit score.
"If you want to show lenders that you're responsible and you know how to use your money and you want to raise your credit score, use all of your credit cards to pay your bills. I have nine different credit cards to pay my bills," says Smith.
Smith explains that by charging their regular monthly bills (such as their electric bill, gas bill, and streaming service subscriptions like Netflix and Hulu) to a credit card and paying it off in full each month, they are able to responsibly use their credit without the fear of overspending.
"By using your credit cards to pay your bills every month, you're keeping your utilization low, you're paying it back on time every month, you're gaining points, and you're using the money you would have already been spending," says Smith.
Review
What Smith is doing is taking advantage of their monthly expenses to show responsible credit behavior and keep their credit utilization low. Credit utilization ratio refers to the amount of debt you have in relation to your income (debt/income = credit utilization ratio). So the lower your utilization ratio is, the better (ideally 36% or less).
This is a great hack for new credit card users looking to build their credit history without the worry of overspending – as long as they pay their credit card balance in full each month. But make sure to read your bills' policies before charging your card as some expenses, such as rent, may charge you a fee for paying with credit. The exception to this rule is the
How to 'overuse' your credit card for a credit limit increase
The hack
TikTok creator Justjwoodfin (aka Mr. 800) made a post explaining how he is able to make multiple large payments on his credit card, pay it back in full before the statement date, and repeat the process for four months in order to receive a credit limit increase.
How it works
Justjwoodfin breaks down how two different people might use a credit card with a $500 credit line:
- Person A charges $300 on their card, pays the minimum payment at the end of the month (including $5 of interest), and continues to pay the minimum payment for the next four months without spending any more on the card.
- Person B, however, spends $490 on their card (leaving only a $10 credit line) that's then paid in full five days later. Then, Person B spends another $490 immediately after paying off the original charge in order to repeat the process until three days before the statement balance in which the final $490 is paid in full once again.
At the end of the four-month period, Person A has accrued $20 in interest, still owes $180 on their card, has a higher utilization ratio, and gets denied for a credit limit increase. Person B, on the other hand, has spent almost $6,000 on their credit card, has gained no interest, has no remaining balance and a low utilization ratio, and is able to receive an increased credit limit on their card.
Review
What Justjwoodfin is doing is called "cycling" your credit limit, which is when you max out your card and then pay it off repeatedly in the same billing cycle. This may result in an artificial credit line increase. But cycling your credit limit is extremely risky, especially on a new card.
Some banks (such as American Express or Chase) may flag cycling as risky behavior. If flagged, you might receive a request for a financial review (a review of your bank statements and tax information), a points clawback (if you're abusing bonus categories), or even an account shutdown. Plus, there's not even a guarantee you'd actually receive a credit line increase.
Overall, cycling your credit limit is a bad idea. The best way to earn a credit line increase is by responsibly using your credit card and paying your balance in full each month.
15/3 credit card payment hack for an improved credit score
The hack
The 15/3 credit card payment hack is a rumored way to artificially lower your credit utilization ratio by paying a majority of your card's balance 15 days before your statement date, and the rest of your remaining balance three days before your statement date.
How it works
If you search "credit card hack" on TikTok you're sure to find dozens of posts on the 15/3 method. The Clever Credit Guy (who goes by Clevercreditfix on TikTok) is not the inventor of what is probably the most popular credit card "hack" on the app, but he does do a good job explaining how it's meant to work.
"It's a credit optimization strategy," he explains. "While it won't double your payment history, the 15/3 credit payment hack can actually help you reduce the reported amount on your credit card."
Like some of the other hacks on this list, the 15/3 payment hack is a way to reduce your credit utilization ratio for an improved credit score. By paying the majority of your credit card balance 15 days before your statement date, your credit report will document the smaller, remaining balance, leaving you with a lower credit utilization ratio.
Review
Despite its popularity online, the 15/3 hack was debunked last year by John Ulzheimer, an Atlanta-based credit expert who worked for FICO and Equifax. In an interview for NerdWallet, Ulzheimer explained how credit card companies report to credit bureaus on the statement closing date (not the payment date which is typically three weeks after) and that this occurs only once a month.
Since creditors only report once a month, making more than one payment is arbitrary. Furthermore, the numbers "15" and "three" are random and don't actually correlate with anything.
Therefore, despite the 15/3 hack's popularity online, the actual methodology behind it doesn't hold up. There isn't a way to artificially manipulate your credit utilization ratio. So if you're looking to lower your utilization ratio, the best strategy is to practice responsible credit card spending habits and (you guessed it) pay your balance in full every month.