Can I use my credit card to pay for a house deposit?

Can I use my credit card to pay for a house deposit?

Buying a property is arguably one of the biggest purchases you’ll make in your lifetime, with the initial deposit costing a fair chunk of anyone’s savings. However, you may be wondering if a credit card is an accepted form of payment for a deposit?

Here is everything you need to know about using a credit card to pay for a house deposit.

Is it possible to pay for a house deposit with a credit card?

Short answer, no. Even if your credit card provider approved this purchase, your home loan lender would see this as a high-risk transaction. This would give them cause to cancel your loan approval. Further, the property sale would likely fall through as, in the settlement period, the real estate agent and seller would have cause to cancel the sale.

Considering that paying for anything with a credit card can lead to defaults on payments and high amounts of debt for the cardholder, this is in the would-be buyers’ best interest.

In fact, here are the most commonly accepted payment methods for house deposits:

  • Personal cheque – one of the modern instances of cheques still being the most favourable payment method is for a house deposit.
  • Counter cheque – If you don’t have a cheque book, you may be able to get a counter cheque from a branch prior to private sale/auction.
  • Electronic funds transfer – Paying your deposit directly to the real estate agent/seller.
  • Deposit bond – typically used when a buyer is awaiting funds from an existing sale, a deposit bond is used instead of cash until settlement - where the deposit is paid in full.

Before you attend an auction or make an offer to a real estate agent, consider asking them what the preferred payment method is.

Credit limits and house deposits

In past years, home loan lenders have been more accepting of new borrowers with smaller deposits – 5 per cent and lower in some cases. However, following the Royal Commission into the Banking Sector and Australian Prudential Regulation Authority crackdown on irresponsible lending practices, the days of tiny deposits for million-dollar mortgages are gone.

Nowadays lenders encourage borrowers to have a deposit of 20 per cent or more. Not only does this showcase a level of financial responsibility on the borrower’s behalf but helps them to avoid paying costly lenders mortgage insurance (LMI). Home loans of 10 per cent are still available, but lenders may be more likely to reward borrowers with higher deposit sizes with lower interest rates too. So, there can be financial incentives to saving a bigger deposit.

Hypothetically speaking, putting a house deposit on a credit card may mean you’re putting $110,537 on your plastic, based on national house prices from CoreLogic in August 2020. Not only would this debt be astronomical for any credit card holder, but the potential interest you might pay could balloon over $400,000, if you only made minimum repayments.

Cost of putting a house deposit on your credit card in Australia

National median house price $552,689

 

20% deposit amount $110,537
First monthly repayment

(16% purchase rate)

$2,244
Total paid in minimum credit card repayments $421,408
Time taken to pay off balance 81 years 7 months

Source: CoreLogic Index Results, August 2020. ASIC credit card calculator.

Note: Figures based on 16 per cent interest rate and cardholder making minimum repayments.

Even if your home loan lender or the real estate agent approved this payment method, and even if you had these funds in your savings, you’d need to consider whether your credit limit would allow this purchase to be approved in the first place.

In fact, most credit cards have maximum credit limits around $100,000. If you’re the type of high-earning Australian who qualifies for a credit card like this, it begs the question: would you need to put a house deposit on a credit card in the first place?

For example, the AMEX Platinum is a charge card with no specific credit limit, but if you don’t pay the balance in full by the end of the month, you’ll be hit with a fee. It also carries an annual fee of $1,450 and requires an income of $100,000 or more.

If you can afford this kind of card, then realistically, you can afford to save for a house deposit.

How can I afford a house deposit then?

It’s no secret that property prices have grown sky-high in the last few decades, with young Aussies struggling to get a foot on the property ladder.

If you’re looking for a means to get a house deposit, you’ll unfortunately have to consider doing so the old-fashioned way. However, here are some helpful tips to boost your savings and get yourself that much closer to nabbing your first property.

RateCity tips for first home buyers:

  1. Dream smaller – you’re not going to be able to afford your dream home the first time around. It’s called a property ladder for a reason, so consider making a smaller step with a more affordable apartment in an up-and-coming suburb first.
  2. Sell your belongings - it’s never been easier to make some extra cash thanks to buy/swap/sell platforms like GumTree or Facebook Marketplace.
  3. Bridesmaid suburbs – similar to shopping smaller, consider looking for property in a bridesmaid suburb, aka a suburb near your ideal suburb that is more affordable.
  4. Choose a better savings account – if your savings account is paying you next to nothing in interest repayments, it may be time to compare your options to see what could give you a better return on your savings.

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Learn more about credit cards

How to get a credit card for the first time

A credit card can be a useful financial tool, provided you understand the risks and can meet repayment obligations.

If you’re a credit card first-timer, review your options. Think about what kind of credit card would suit your lifestyle, and compare providers by fees, perks and repayments.

Once you’ve selected a card, it’s time to apply. Credit card applications can generally be completed in store, online or over the phone.

When you apply for a credit card for the first time, you must meet age, residency and income requirements. As proof, you must also provide documentation such as bank account statements.

How easy is it to get a credit card?

For most Australians, there are no great barriers to applying for and getting approved for a credit card. Here are some points that a lender will consider when assessing your credit card application.

Credit score: A bad credit score is not the be all and end all of your application, but it may stop you being approved for a higher credit limit. If your credit score is less than perfect, apply for the credit limit that you need, rather than the one you want.

Annual income: Most credit cards have minimum annual income requirements. Make sure you’re applying for a card where you meet the minimum.

Age & residency: You need to be at least 18 years old to apply for a credit card in Australia, and most require that you are an Australian citizen or permanent resident. However, there are some credit cards available to temporary residents.

How do you use credit cards?

A credit card can be an easy way to make purchases online, in person or over the phone. When used properly, a credit card can even help you manage your cash flow. But before applying for a credit card, it’s good to know how they work. A credit card is essentially a personal line of credit which lets you buy things and pay for them later. As a card holder, you’ll be given a credit limit and (potentially) charged interest on the money the bank lends you. At the end of each billing period, the bank will send you a statement which shows your outstanding balance and the minimum amount you need to pay back. If you don’t pay back the full balance amount, the bank will begin charging you interest.

How to pay a credit card

There are a few ways to pay a credit card bill. These include:

  • BPAY - allows you to safely make credit card payments online.
  • Direct debits - set up an automatic payment from your bank account to pay your credit card bill each month. You can choose how much you want to pay of your credit card bill when you set up the auto payments.
  • In a branch.
  • Via your credit card provider's app.

Does ING increase credit card limits?

You may want to increase your credit card limit for many reasons, such as having access to more spending money. However, if you are using the Orange One credit card issued by ING, you may not be able to do so. 

ING customers can choose a credit limit of their preference when applying for the Orange One credit card. Depending on your financial situation, this limit can be anywhere between $1,000 and $30,000. If you qualify for a Rewards Platinum card, the minimum credit card limit will likely be $6,000. 

Ideally, you should set your credit card limit knowing how much you can afford to repay each month and keep your expenses lower than this level. With most credit cards, you should have the option of requesting a credit card limit increase at a later time, although you will need to qualify for any increase. With an ING credit card, limit increases are out of the question (at the time this was published), which means you may want to apply for a higher credit card limit from the beginning. Remember that you have the option of decreasing your ING credit card limit at a later time.

What is a balance transfer credit card?

A balance transfer credit card lets you transfer your debt balance from one credit card to another. A balance transfer credit card generally has a 0 per cent interest rate for a set period of time. When you roll your debt balance over to a new credit card, you’ll be able to take advantage of the interest-free period to pay your credit card debt off faster without accruing additional interest charges. If your application is approved, the provider will pay out your old credit card and transfer your debt balance over to the new card. 

What should I do if my ANZ credit card has expired?

Your ANZ credit card is considered expired only after the last day of the month and year marked on your card. For instance, if your card’s expiry date reads 03/22, it is valid until 31 March 2022 and expires on 1 April 2022. Typically, you should have received a new credit card by that date, and you won’t have to request a new card. 

Once you get the new card, you should remember to switch any automatic payments you have - such as a utility or mobile phone bill - from your expired credit card to your new credit card. Equally, if you are using CardPay Direct to repay your ANZ credit card debt, you may need to update the credit card account details for that service as well. 

In case the new card doesn’t arrive by the expiry date of your current credit card, you can call ANZ on 13 22 73 to find out the reason and if you need to request an expedited card. Please note that if you were planning to close your credit card account or request a credit card upgrade, you may need to call ANZ at least before the 25th of the month your current credit card expires in, as that’s when they may send you the new credit card.

What should you do if your credit card is compromised?

Credit card fraud is a serious problem. If your credit card is compromised and you’re wondering what to do, here are a few precautionary steps to take.

Contact you credit provider – Get in touch will your credit card provider. If you feel your card has been compromised, you should be able to lock or block it.

Monitor your accounts – Keep an eye on your credit card accounts. Any unauthorised transactions could be a sign your credit card has been compromised.

Check your credit rating – It’s also important to check your credit rating, to ensure you’re not a victim of identity theft or some other financial mischief.

How do you use a credit card?

Credit cards are a quick and convenient way to pay for items in store, online or over the phone. You can use a credit card as a cashless way to pay for goods or services, both locally and overseas. You can also use a credit card to make a cash advance, which gives you the flexibility to withdraw cash from your credit card account. Because a credit card uses the bank’s funds instead of your own, you will be charged interest on the money you spend – unless you pay off the entire debt within the interest-free period. If you pay the minimum monthly repayment, you will be charged interest. There are many different credit card options on the market, all offering different interest rates and reward options.

How do I apply for a BOQ credit card limit increase?

If you’re an existing BOQ customer, you can request a BOQ credit card limit increase over a phone call. However, you should remember that owning and using a credit card is a matter of financial responsibility, so it might be worth thinking this decision through. 

When requesting a credit card limit increase, you’ll need to be just as responsible in terms of how much you earn and can set aside to repay the outstanding card balance. A credit card company may approve a credit limit increase only if you can show that you have either the income or the disposable income, which is the amount you have left after all expenses have been paid out.

For this purpose, you may need to submit your latest income documents and bank statements for an increase. You may want to estimate how much you usually have left after deducting your expenses, and then use this amount to try and convince the credit card company. Also, you may prefer to pay off the card balance in full each month and thus avoid paying interest on the card, helping you back up any claims of financial responsibility, as well. 

Remember that you may not be able to apply for a credit card limit increase beyond any limitations on the type of card you own. For instance, if you own a card whose ceiling is $10,000, and your current limit is $5,000, you won't likely be able to apply for a $10,000 credit card limit increase.

How can I increase my Bankwest credit card limit?

When you apply for a Bankwest credit card, you get assigned a pre-set credit limit, which will end up being the most that you can spend on your credit card before having to pay it off. Your credit limit is chosen for you and your current financial situation, and you should remember not to overspend, irrespective of the limit, in order to avoid racking up a massive bill.

However, banks and lenders understand that your needs will change, and have made it possible for you to increase your credit card limit, allowing you to get extra cash when you need it most. Moreover, with a higher spending limit, you may be able to get access to certain perks and benefits with your Bankwest credit card.

To increase your Bankwest credit card limit, you can visit any of the bank’s branches or call 13 17 19 and follow the steps outlined.

How do you apply for a credit card?

You can apply for a credit card online, over the phone or in person at the bank. Once you’ve compared the current credit card offers, the application process is quick and easy. Before you get your application started, you’ll need to gather your personal information like proof of ID, payslips and bank statements, proof of employment and details of your income, assets and liabilities. To be eligible for a credit card, you’ll need to be an Australian citizen over 18 and earn a minimum of $15,000 each year. Once you’ve applied for a credit card, you should get a response fairly instantly. If your credit card application has been approved, you should receive a welcome pack with your new credit card within 10-15 days.

Can a pensioner get a credit card?

It is possible to get a credit card as a pensioner. There are some factors to keep in mind, including:

  • Annual income. Look for credit cards with minimum annual income requirements you can meet. 
  • Annual fees. If high fees are a concern for you, opt for a card with a low or $0 annual fee. 
  • Interest rate. Make sure you won’t have any nasty surprises on your credit card bill. Compare cards with a low interest rates to minimise risk.

Should I get a credit card?

Once you've compared credit card interest rates and deals and found the right card for you, the actual process of getting a credit card is quite straightforward. You can apply for a credit card online, over the phone or in person at a bank branch.