#34: Credit cards kill your borrowing capacity

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#34: Credit cards kill your borrowing capacity March 5, 2019

Most borrowers assume credit or store cards do not affect their borrowing capacity.  But, even if you only have one card which you clear in full each month (or never even use), this can have a substantial impact.

 

Today we’re providing some detail on how and why a credit card can impinge on your ability to secure finance.

  • We discuss the impact of credit cards limits, not just balances owing, on debt serviceability.
  • How to responsibly use credit cards, including rewards programs and multiple card applications.
  • Credit card paperwork for loan applications.

Did you know a $10,000 credit card limit could reduce your borrowing capacity by $50,000?

Credit cards can absolutely be part of a sensible money management strategy, it’s just important to know the advantages and disadvantages, so you can determine what’s best for you.

Some stats: There are c 16 million credit and charge cards in circulation, albeit this number is falling predominantly due to lower take up by younger people (perhaps due to ‘debit’ card usage).

In Dec 2018, the total value of card transactions was c $29.5 billion, and balances were at c $52 billion, or approx. 34% of credit limits available.  For further details see here.

Best of luck and enjoy the show!

If you have specific questions for myself or Patrick you can email hi@longproperty.com.au and we’ll respond within 24 hrs.

If you liked this episode you can subscribe to our Long Property Show podcast here.

The Long Property Show provides general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances and your full financial situation will need to be reviewed prior to acceptance of any offer or product. Nothing in the Long Property Show constitutes legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances.

DANIEL GOLD

Dan runs Long Property and has been recognised by Mortgage Professional Australia as being one of the top 5 mortgage brokers nationally.  Email dan@longproperty.com.au

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