Credit card working for you!
- Thread starter Ridin-High
- Start date
Minx
No - just the minimum monthly payments that you must make on the card/s every month (i.e. the 2% or 3% of the limit, depending on the bank). If the banks took the LIMITS away from your income, there would be a lot of people who would simply not be able to borrow!
Cheers
Lynn
Ridin-High
I also have a credit card as part of a professional package (attached to PPOR loan). I pay everything on credit card each month and pay it out in full by the due date. As I have done this for a number of years (never paid interest) my bank does not currently consider my CC as a debt issue when calculating my borrowing capacity. I also benefit from a rewards program, although I choose to convert my rewards points back to a cash amount that is only allowed to be paid directly onto the card...still it saves me using my own money to pay some of the month's balance.
One extra way I benefit from using my CC is by having a 100% offset account attached to my (PPOR) home loan. The longer I can leave my funds in the offset account each month the greater the offset benefit. Obviously the benefit to you would be dependent on how much you are regularly able to leave in your offset account..although only a few thousand could potentially save you quite a few hundred dollars a year in interest on your PPOR. Hence the reason I pay everything on CC each month...with no cost to myself, I am able to use the bank's credit for the month whilst leaving my own funds in the offset account saving me $ each month in interest.
Hope this helps.
If you have a $5,000 credit card limit, for serviceability purposes most banks will assume you are paying interest on the full $5,000, regardless of your income or spending/savings habits.
This equates to about $150 per month you can't have available to serivce a home loan. This in turn equates to about $15,000 you can't borrow for a property.
If you've got $50,000 in credit card limits (regardless of actual debt), you're sacrificing about $150,000 in property affordability.
Ridin-High: Your CBA banker is giving you crappy advice. The worst thing is that he knows it. Credit cards are the junk food of the finance industry. They are the most unethical product out there (sooner or later they'll offer a higher limit without qualification).
They can be useful if you can manage it without compramising your existing spending habits, but a debit card does the same job without the risk. You've got to have it as part of your pro-pack, but my advice is to just cut it up and never use it. Only about 1 in 20 people actually use them to their ability and the banks know it.
Every distressed mortgage I've seen had at least one large credit card or personal loan involved.
This equates to about $150 per month you can't have available to serivce a home loan. This in turn equates to about $15,000 you can't borrow for a property.
If you've got $50,000 in credit card limits (regardless of actual debt), you're sacrificing about $150,000 in property affordability.
Ridin-High: Your CBA banker is giving you crappy advice. The worst thing is that he knows it. Credit cards are the junk food of the finance industry. They are the most unethical product out there (sooner or later they'll offer a higher limit without qualification).
They can be useful if you can manage it without compramising your existing spending habits, but a debit card does the same job without the risk. You've got to have it as part of your pro-pack, but my advice is to just cut it up and never use it. Only about 1 in 20 people actually use them to their ability and the banks know it.
Every distressed mortgage I've seen had at least one large credit card or personal loan involved.
Minx
No - just the minimum monthly payments that you must make on the card/s every month (i.e. the 2% or 3% of the limit, depending on the bank). If the banks took the LIMITS away from your income, there would be a lot of people who would simply not be able to borrow!
Cheers
Lynn
Thanks Lynn,
I'll tell my broker that as it was he who told me they took the limit into account. Damn amateur!
We also buy everything on C/C to accumulate points.
A further tip I would like to add is that apart from paying of the credit card balance each month also ensure that you do a thorough reconciliation.
Sometimes it is hard to recognize the original transaction based on what is printed on the statement, so you do need to either have a good memory, keep all dockets in some realistic order or run a separate register.
In my case my wife also spends money on my C/C (bills such as telstra, rates water etc) she records this in a register and then when the statement arrives cross checks each of her entries. I remember my transaction 99% of the time but some of the details on the statement can throw you.
Having said all this, recently one of my cards was used in a fraud, this is my backup c/c so get minimal use per month (in fact only one regular debit) amounting to $100-200 per month.
My wife generally pay this without really looking at the transaction. In this case the min payment was about $135 and my wife simply read this as the balance and paid it. If she had actually turned over the sheet she would have seen some $7000 of fraudulent transaction
In this case we didn't become aware of the fraud until the toll operator adviced us that they could not process their standing transaction. This was due to the c/c company having stop the card it was then that I went to check what was going on and found all the dodgy transaction.
The transaction are still being investigated aad although they have been stopped they have not been automatically reversed.
Cheers
A further tip I would like to add is that apart from paying of the credit card balance each month also ensure that you do a thorough reconciliation.
Sometimes it is hard to recognize the original transaction based on what is printed on the statement, so you do need to either have a good memory, keep all dockets in some realistic order or run a separate register.
In my case my wife also spends money on my C/C (bills such as telstra, rates water etc) she records this in a register and then when the statement arrives cross checks each of her entries. I remember my transaction 99% of the time but some of the details on the statement can throw you.
Having said all this, recently one of my cards was used in a fraud, this is my backup c/c so get minimal use per month (in fact only one regular debit) amounting to $100-200 per month.
My wife generally pay this without really looking at the transaction. In this case the min payment was about $135 and my wife simply read this as the balance and paid it. If she had actually turned over the sheet she would have seen some $7000 of fraudulent transaction
In this case we didn't become aware of the fraud until the toll operator adviced us that they could not process their standing transaction. This was due to the c/c company having stop the card it was then that I went to check what was going on and found all the dodgy transaction.
The transaction are still being investigated aad although they have been stopped they have not been automatically reversed.
Cheers
This card looks very good...
Bank West Mastercard
http://www.bankwest.com.au/Personal/Credit_Cards/BankWest_Zero_MasterCard/
Balance Transfer 0 interest for 9 months and 0 interest on purchases for 6 months!
Bank West Mastercard
http://www.bankwest.com.au/Personal/Credit_Cards/BankWest_Zero_MasterCard/
Balance Transfer 0 interest for 9 months and 0 interest on purchases for 6 months!
Last edited:
Dosen't all the CC applications end up in your Credit History and look wierd?
Anyway, I love my CC. Don't spend it much at all. No annual fee and NO rewards scheme. Only instant discounts on selected
stores/merchandise/services.
0% balance transfer means that when you apply for the new card, you can transfer the balance from your old high interest card to the new card and you will not pay any interest on that amount for 9 months (As in my link above)
I've noticed that my psychology changes when I have a credit card.
I thought I was pretty good on not getting "stuff" I don't need.
But recently, I lost my CC, and had to revert to a debit card for expenses.
I was a lot more careful with spending, as I saw actual money being drawn out of my account, rather than an amount I would have to pay in the future.
And I usually do pay the full amount. On time.
But sometimes I miss by a day, and that hurts.
I thought I was pretty good on not getting "stuff" I don't need.
But recently, I lost my CC, and had to revert to a debit card for expenses.
I was a lot more careful with spending, as I saw actual money being drawn out of my account, rather than an amount I would have to pay in the future.
And I usually do pay the full amount. On time.
But sometimes I miss by a day, and that hurts.
find another provider, as this 9mth 0% promotion is only for a limited time. As santaslayer said, we need to watch out on the number of enquiries that appear on our Veda Advantage statement, as lenders can refuse to give you loan based on this. (I'm a victim of this, as PMI was scared of my credit history and was very reluctant to give me any more loan).
