How Much Credit Do You Have in Comparison to Your Income?

Priceless Class on 13/08/2017 - 07:50

Many Ozbargainers game the credit card system for fast-tracking reward points or as a low/no cost loan by keeping their savings either in a high interest earning account, using a positive balance transfer (where possible) or offsetting against their home loans (stoozing).

While you can keep track of your 'credit scores' via websites like www.getcreditscore.com.au and www.creditsavvy.com.au and use various websites such as finder to gauge the lending criteria applicable to each specific card, I've often wondered just how high or what percentage of credit in relation to one's income you are able to secure.

For example, I currently have 5 different low/no cost cards holding balance transfer amounts totaling about $40,000. Let's say I earn about 100k a year - How much more credit might I able to secure? Ie, Could I move 15k of my credit onto another balance transfer card making my collective credit limit 55k? (more than half of my annual income) or would this be too highly leveraged for most banks?

I know there is no hard and fast rule around this and each bank will have different limits/criteria, but I am interested to hear how leveraged people are?

Financial

Comments

  • Nugs on 13/08/2017 - 08:13
    +1

    no credit

  • PJC on 13/08/2017 - 08:20
    +3

    I don't want credit. I want money.

  • chumlee on 13/08/2017 - 08:27
    +2

    when you apply & they ask about your expenses and current credit cards and limits, they will add about 3% of your credit limits ($1200) into your monthly living expenses to determine your capacity to borrow more. Some might do 2%.

  • Diji1 on 13/08/2017 - 08:28
    -4

    Many Ozbargainers game the credit card system

    They delude themselves that this is what they're doing when the reality is that they're spending more money than they would if they did not have a credit card. This occurs unconsciously and automatically without your awareness.

    You are not leveraged by having credit card debt unless your investing the credit your obtaining.

    • tsunamisurfer on 13/08/2017 - 11:08
      +2

      I think thats too much of a generalisation.

      There are many here that keep their spending under control.

      I used to pay almost everything by cash until the ING 2% cash back trained me to pay electronically for things, then again to another level for the Citibank Signature.

      In the years I have had the Signature, I've only spent more because of children., but paid zero interest, zero fees and got about $1000 in gift cards just before they increased their value.

    • loulou1 on 13/08/2017 - 12:57
      +3

      Subconsciously rather than unconsciously I think

  • grabngo on 13/08/2017 - 09:19
    +1

    I give u credit for putting up your salary.
    I don't give u credit for having so much credit.
    Ps I give credit where it is due

  • Priceless Class on 13/08/2017 - 09:49
    +6

    I expected the haters to hate. It wasn't an attempt at competition or gloating. I have to disagree with you Diji1. I live a very minimalist lifestyle, investing in experiences with my family (holidays) rather than objects and the majority of my 'unconscious' spending as you suggest is not 'money I wouldn't have otherwise spent', but actually my day to day living costs. Think utilities, insurance, groceries, fuel etc over several years. I have the savings to pay my credit to $0 tomorrow if I wanted to, but by utilising 0% offers and delaying payment, I get a return of approximately $1250 per year in savings against my home loan that I would otherwise have lost to interest repayments. To this day, I have never paid an annual fee or balance transfer fee, choosing to only take up offers that waive these. I've also garnered over 300,000 velocity points over the years which regardless of what you think, will get me well over $1000 in gift cards or a considerable overseas trip.

    I know there are many others that do similar and was simply interested to find out how far people push their capacity.
    If you choose not to participate in such a system, good for you in making that choice and I'm sure it works for you.

    • mskeggs on 13/08/2017 - 10:02
      +3

      I understand what you are doing, but the reason I don't do the same is the downside if I miss a deadline and get hit with an interest payment, or if something else unexpected happens (e.g. My spouse sees the house of her dreams and I need to qualify for a mortgage straight away).
      So for $1000 a year that I could possibly get if I went to the hassle of multiple applications, opening and closing accounts, taking the risk that me or the finance company make an error that then needs to be sorted with calls to help lines or similar.
      It isn't worth it for me.

      • Priceless Class on 13/08/2017 - 14:15

        Fair enough on the mortgage perspective and I'd agree with you that is probably a big reason not to play with credit for anyone looking at buying their first house or an investment in the near future. My experience was that the banks were fine with refinancing if I could finalize and close my excess credit accounts to within acceptable limits for the bank to facilitate the loan and I've had no problem securing a refinance on 2 occasions over the last 5 years. I acknowledge refinancing is different to getting a loan for the first time.

        Also understandable if you don't feel confident keeping track of dates/payments etc. Using a spreadsheet and calendar reminders or direct debit for the minimum payments, with a preset final balloon payment forward dated in your internet banking makes it pretty much set and forget though in my experience.

        Fair enough if you don't think it's worth the time / return.

    • CheapskateQueen on 13/08/2017 - 10:21
      +3

      im the same but the CC game is very dangerous and only for those in control. My friends know what I do but I actually warn against my/OB level of CC usage. There's yet to be a person that I know that I am confident would be utterly in control that I would recommend they do it. (im referring to the multiple, exploiting multiple deals at once, using CC for almost everything etc)

      I do encourage certain people to do the sign up for FF bonuses though and then just tell them to throw the card away. A few ppl have done this once or twice successfully and for people in debt, the 0% transfer deals have helped them considerably.

      On the OPs point - I've always been surprised at how much credit is given via CC vs total income.

    • idjces on 13/08/2017 - 18:24

      Something like 62% of my main wage. Have a 20k citibank cc i would typically never use, i only keep it in the hopes of 0% balance transfers but looks like they haven't offered any in years.

      I've changed strategies as I've grown older. It's good to have the credit available, but when a recession finally hits, you want to have empty credit lines available to use, if you've already loaded up in the good times then it'll take far too long to pay down and you'll miss the opportunities.

      Plus it's a lot of pissing around, i'll personally just stick to the higher flyer points offers going forward.

  • CyberMurning on 13/08/2017 - 09:58
    -1

    Too much credit card are not good

    • Priceless Class on 13/08/2017 - 14:19

      Too much credit card debt (which you can't repay) is not good.

      • CyberMurning on 13/08/2017 - 14:35
        -1

        No need debt, just credit card with credit limits are hugely affecting your borrowing power. Credit limit of $2000 Bank will take that you have debt of $2000 already. Doesn't matter you have used it or not.

        • Priceless Class on 13/08/2017 - 14:55

          Agreed if borrowing power (for a mortgage) is something you need in the immediate future, then too much credit is definitely a bad thing. I think my original amendment stands though. If you have the ability to finalize and close credit accounts, it shouldn't impact your borrowing power at all.

  • Donaldhump on 13/08/2017 - 16:32

    couldn't be bothered with the effort. i have a debit card i transfer $500 to every fortnight, and this pays my bills. the amount i lose in interest is tiny.

  • [Deactivated] on 13/08/2017 - 19:38

    I have no loans. I have a credit card which has a little over 10k credit and far over 100k income.

    Everything auto pays from the credit card and I just repay it each month.

    Maintainer, never paid interest.

  • sunnyc on 13/08/2017 - 22:56

    Yeah I don't enjoy owing money to a creditor hence I just pay it off frequently. Just close most unnecessary cards. I just have a interest free card and an Amex platinum. Sometimes when there is a promotion, I sign up for a card and close it in 4-6 months with only like 2-10 transactions.

  • Samsungnote10 on 13/08/2017 - 23:06
    +2

    I have 3x my income in credit limit.

    Credit cards If managed well can be a source of reward points and can even make you profit if you have a offset and home loan.

    It requires a certain degree of financial intelligence and discipline and effort of course

    I've virtually earn enough points for a return business class trip anywhere in the world for this year alone. Obviously it required a bit of planning and effort but well worth it for me.

    Ymmv

  • HeWhoKnows on 14/08/2017 - 17:20

    Sorry. None of your business buddy!
    Just worry about youre own debts and if you have reasonable capacity to pay them off, especially if something unexpected happens!
    Thats all that counts.

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