Limits on total debt across multiple credit cards...?

[wafter]

With savings rates not utterly terrible I'm currently on a drive to load all my necessary spending onto 0% credit cards and stuff my wages into a savings account.

Assuming I'm not limited by the total amount I can borrow I reckon this could net me a non-trivial amount of interest annually, once I've got a couple of years worth of outgoings invested.

So far I've hit the limit on one card and moved onto another.. which will probably last about another six months until that too is full. Based on this limited example it seems that while individual lenders are cautious / relatively consistant with the credit limit they'll give me on one card, providers of successive cards aren't concerned about the value of any outstanding debt I might already have on other cards.

Can anyone with more experience in this field confirm that one can effectively just keep racking up debt by obtaining another card once the existing ones are full, effectively ad infinitum?

I'm aware of the need to pay the cards off in full at the end of the promo term.

Cheers!

 

[vickster]

You might want to consider the effect of having chocka credit cards if you are ever likely to need to borrow more. Other card providers may decide that your credit score is too low to lend any more.
Also, depending on your tax code, you'll be paying tax on interest earned on non ISA savings after the first £500/£1000

 

[fossyant]

It's a risky strategy. You need to make sure your savings are enough to cover the debt and pay it all off at the point it goes to interest bearing. Some cards are linked, so you could be limited to how many you get as the underwriting bank is essentially the same. Also your credit rating will limit what you can have especially if it's mounting up. They know how much debt you have. The data is shared.

 

[Drago]

How much is "non trivial" interest? Only takes a bag and the HMRC get moist.

 

[PaulSB]

I do something similar if the opportunity arises. I can cover all my debt from savings. Currently I have a five year loan with Tesco bank that I picked up three years ago at 2%. It was a no brainer. This was to buy a car. Plus I have 0% borrowing on cards with Virgin and Tesco.

The Tesco one runs out in three weeks. It's £1600. Just last night I got a 22 month transfer at 0% and with a 1.49% fee from Barclaycard. I requested £1700, Barclaycard have me a £7500 credit limit. Cost to me is £25.33 over 22 months.

Once I have the card I cut through the magnetic strip, the chip and contactless area. I NEVER use the card again. I only ever do this for major purchases such as a car, bike or major long haul holiday.

As a pensioner with limited income but decent savings preserving my capital is important. I make the minimum monthly repayment to maximise my cash flow.

I would never do this for a household expenses, I view that as potentially living beyond one's means.

My credit rating is 969.

 

[PaulSB]

As an aside I went through Experian to get the Barclaycard. Far better offers there than Moneysupermarket etc.

 

[si_c]

Having above 25% utilisation of your credit directly impacts your credit rating and the amount of credit you will be offered. There are a limited number of credit card companies actually providing credit as @fossyant notes, they will want to minimise the risk exposure, so if you have more than one card with them, don't expect to get another if running credit balances. Certainly don't expect to get 0% or low interest credit cards beyond a very limited point.

Be very cautious about your own exposure, general savings accounts have very poor interest (the best I have is a regular saver at 6%) . My thought is the risk isn't worth it. You'd need a good investment (an index fund say S&P500 might get you around 10% per year at best).

Assuming a 40k per year salary (yours maybe more, but this is what I'm going with), with 2k per month recurrent expenses which can be moved to a 0% credit card. Also assuming you can get an 8% consistent return, this would yield total debt at the 2 year mark of £48000, with savings of £51800. Total additional earnings of £1,500 per year.

You'd be far better off in the long term getting a side gig and investing that money into the same investments. I went with a 2 year baseline as that's the point at which you'll likely run out of your 0% offers based on experience.

 

[wafter]

Thanks folks - appreciate your thoughts!

By the standards of most the sums involved are trivial as I live a pretty low-income, low-expenditure existance.

Currently the £1k tax-free allowance correlates to about £20k invested at 4%, which is well beyond the amount of debt I'd be able to accrue annually on necessary expenditure (food, water, service charge & ground rent for the flat fuel, MOT & repairs for the car, socialising and any other "one off" purchases - clothing, stuff for the bike etc).

At the end of the financial year any taxable savings beyond what I expect to be required to pay off the cards in full can be moved into my ISA, and again I earn nowhere near enough to use the full £20k annual ISA allowance.

I do something similar if the opportunity arises. I can cover all my debt from savings. Currently I have a five year loan with Tesco bank that I picked up three years ago at 2%. It was a no brainer. This was to buy a car. Plus I have 0% borrowing on cards with Virgin and Tesco.

The Tesco one runs out in three weeks. It's £1600. Just last night I got a 22 month transfer at 0% and with a 1.49% fee from Barclaycard. I requested £1700, Barclaycard have me a £7500 credit limit. Cost to me is £25.33 over 22 months.

Once I have the card I cut through the magnetic strip, the chip and contactless area. I NEVER use the card again. I only ever do this for major purchases such as a car, bike or major long haul holiday.

As a pensioner with limited income but decent savings preserving my capital is important. I make the minimum monthly repayment to maximise my cash flow.

I would never do this for a household expenses, I view that as potentially living beyond one's means.

My credit rating is 969.

Thanks and yes - I'm the same with the savings and I don't see any issue in this regard if you're not spending more than you would otherwise.

I don't see why this is an issue with household expenses - why not spend someone else's money and invest your own for a bit of a return if you can borrow it for nowt...?

That's a cracking rate on the balance transfer with Barclaycard - usually the minimum I see is 3%. That was through Experian? I assume you have to be a member, and is that a paid-for service? That said I tend to go with 0% payment cards and just rack up the spending rather than paying to transfer the balance.

I also had a similar experience with Barclaycard (which was got through MSE) - the second card I got (Lloyds) had a credit limit a bit lower than the previous one (HSBC) which was fair enough as I'd since moved and my household expenditure had gone up. I expected similar from the third (Barclaycard) but they came back with a credit limit nearly twice that offered by Lloyds.

I have DD's setup to cover the minimum monthly payments on each card and once maxed out just leave the outstanding amount to drift down with these payments whilst loading up the next one, being sure to pay each off a week or so before the 0% promo period ends.

Having above 25% utilisation of your credit directly impacts your credit rating and the amount of credit you will be offered. There are a limited number of credit card companies actually providing credit as @fossyant notes, they will want to minimise the risk exposure, so if you have more than one card with them, don't expect to get another if running credit balances. Certainly don't expect to get 0% or low interest credit cards beyond a very limited point.

Be very cautious about your own exposure, general savings accounts have very poor interest (the best I have is a regular saver at 6%) . My thought is the risk isn't worth it. You'd need a good investment (an index fund say S&P500 might get you around 10% per year at best).

Assuming a 40k per year salary (yours maybe more, but this is what I'm going with), with 2k per month recurrent expenses which can be moved to a 0% credit card. Also assuming you can get an 8% consistent return, this would yield total debt at the 2 year mark of £48000, with savings of £51800. Total additional earnings of £1,500 per year.

You'd be far better off in the long term getting a side gig and investing that money into the same investments. I went with a 2 year baseline as that's the point at which you'll likely run out of your 0% offers based on experience.

Thanks - that's interesting about the credit rating; I wasn't aware of that. On the one hand this doesn't matter a whole lot to me as it's currently decent, the mortgage has 4.5yrs to run and I'm generally very debt-averse.. thankfully other than the mortgage I'm not in a position where I have to rely on debt, so I see little risk from this angle.

I do have a "credit karma" account which gives me a score - I'll add the cards to that and keep an eye on how it changes.

Personally I'm happy with zero-risk investments at 4%; I certainly wouldn't want to open myself up to losing some of the capital in pursuit of higher returns as I can appreciate how that could be a risky strategy.

My income and outgoings are significantly less than the numbers you suggest so it's all pretty small-scale.. which at least has benefits from the perspective of tax and ISA limits. If my numbers are right the interest would be equivalent to about an additional 2.5% of my annual income.

What do you mean by a side-gig exactly? Really all I'm trying to do is play the banks for a bit of low-grief, low-risk return...

 

[PaulSB]

@wafter I have an account with Experian, it's free. Many years ago government websites were using Experian for identity checks. I signed up then. I've kept the account as it's useful to check my credit rating and credit offers.

By household expenses I've presumed you mean utilities, council tax, food etc? I prefer to pay household expenses as they become due. I feel if I can't cover these without credit I'm going beyond my means. I recognise it's a personal choice. For me the interest would need to be very substantial to make the exercise worthwhile. I view credit card spending as far too easy and only use it when I need the consumer protection offered. I always pay off the full amount unless it's the type of purchase I mentioned earlier.

I've only ever done balance transfer, never 0% spending. I do use PayPal credit for the interest free four months. It simply helps my cash flow. On a pension spreading, for example, £120 on a pair of bib tights helps cashflow for that period.

I like to keep an emergency amount of credit available. My CC debt is only 38% of the credit I can access on cards.

 

[si_c]

What do you mean by a side-gig exactly? Really all I'm trying to do is play the banks for a bit of low-grief, low-risk return...

Pretty much meant an extra part time job, be it uber or working in a shop part time. I've done it before to boost income but no reason it can't be done to boost savings - especially if you invest all of it, you'd only have to do 12 hours a month to beat the additional income at the two year mark - and invested it all you're doubling up effectively. And the upside is it is almost no risk.

Edit to add: I've boosted my regular saving by using the round-ups on my card transactions. Natwest takes each transaction and rounds it up to the nearest £ and adds it to a savings account. They let you double the round up too. Just ensuring I pay for everything I can with my card means I'm saving up to £20 a week extra. Not hugely noticeable day to day but it adds up fast.

 

[Ian H]

I got rid of my credit cards when I retired, just pay cash for everything. About the only thing that makes me think about getting one again is the slightly better protection you get from them. But I can use Paypal for similar protection.

 

[Alex321]

I got rid of my credit cards when I retired, just pay cash for everything. About the only thing that makes me think about getting one again is the slightly better protection you get from them. But I can use Paypal for similar protection.

We, on the other hand, use the Credit card for almost everything beyond very small purchases and places that don't take card. We do carry some cash, just for those, but not very much.

We pay it all off every month by direct debit, it is about convenience, not debt. We could use the debit card instead, but you do get a little bit more protection by using a credit card. And if we make a purchase that would exceed what is in the current account, it gives us time to traansfer some from the savings account (very are, money usually goes the other way, whenever it builds up a bit in the current account).

 

[presta]

I can use Paypal for similar protection

I once saw a bit about Paypal on a consumer programme. I can't remember the details of how it all went wrong, but the gist was that someone didn't get a refund because they weren't protected due to some loophole or other. I've always steered well clear of them.

(I thought I was going to be putting Section 75 to the test recently after a shyster on Amazon passed off a second hand computer as new, but in the end Amazon coughed up a refund.)

 

[vickster]

Rumour is the cash ISA annual limit will be reduced to 10k in the upcoming budget sadly, shares will likely stay at 20k

 

[kynikos]

Don't worry about your credit score, it won't have much effect. Keep on applying and be sure to have funds available when 0% rates expire. I'm retired and a long time stoozer with £90k+ on 0% and a similar amount invested which is giving me £5k+ a year income I wouldn't otherwise have. Latest offering is from Barclaycard 15 months balance transfer @ 0% with no fee.