Your credit card could be costing you $50k in borrowing power
A simple tweak to your plastic could lift your home-loan capacity, and get you to a deposit faster.
Australia’s love affair with tap-and-go is quietly kneecapping first-home hopes. Two things are doing the damage:
Deposit drain: discretionary card spend that leaks hundreds a week; and
Serviceability sting: lenders treat your total card limit as debt, even if you pay the balance in full.
The deposit drain
If you’re putting roughly $1,200 a month on lifestyle buys, eating out, shopping, entertainment and travel, that’s about $14,400 a year not going into your deposit. On a national median home price around $860k, a 5 per cent deposit is roughly $43k. One year of “nice-to-haves” can swallow a third of that deposit. Do that for three years and you’ve essentially burned a full starter deposit.
The serviceability sting
Banks don’t just look at what you owe today; they look at what you could owe. Most assess credit-card limits using a rule of thumb of about 3.8 per cent of the limit per month.
Card limit: $10,000 → assessed repayment: ~$380/month
That single line item can slash borrowing capacity by around $50,000 for a typical couple on a combined income of ~$160k (varies by lender and rates).
So even an “emergency card” you never use can cost real borrowing power. Multiple cards? The hits add up.
What this means for buyers
Carrying a balance attracts interest north of 20 per cent on many cards, last month’s little luxuries become next month’s expensive debt.
High discretionary spend on statements is a red flag in lender eyes. Under the microscope, big recurring card outgoings can read as unsustainable living costs.
Five fast fixes before you apply
Cut limits or close cards you don’t need. Aim to tidy this at least three months before a loan application so statements reflect the change.
Switch everyday spending to debit while you’re saving the deposit.
Track and cap the big four blow-outs: food delivery, dining out, retail therapy and travel.
Automate your savings the day you’re paid; make spending chase what’s left.
Balance-free rule: if you do keep a card, auto-pay to $0 each month.
Worked example
Couple income: $160,000
Card limit: $10,000
Assessed monthly commitment: ~$380
Indicative borrowing-power hit: about $50,000
Trim the limit to $1,000 (or cancel) and you claw back most of that capacity immediately, plus you’ll likely accelerate the deposit by diverting lifestyle spend to savings.
Bottom line
Your card limit and your card habits are two of the easiest levers to pull. Lower the limit (or close the card), rein in the lifestyle swipes, and you could lift your borrowing power and reach the deposit months even years sooner.