Total Available Credit limits v's Income

mgr1970

Does anyone have a rough guide to the total available combined credit limits of credit cards versus your total income.
Reason i ask is my sister has managed to get credit cards with MBNA*2,Halifax one and Mint over the last 6 months the combined credit limits come to £49000 her income with commission is £23000 is this now a common situation her available credit is double her income.
I was wondering if anyone had a guide through there own experiance about the available capacity they have managed to get on or around this income level,as it has left the rest of the familiy a bit worried as shes not exactly tight when it comes to spending,thanks.

Galstonian

Hello (again ) mgr1970,

that is a lot. Even if the limits are spread evenly over the four cards that comes in at over 12K per card which is more than half her income. That in itself is scary never mind repeating it four times in 6 months.

I can't say its a situation that comes up here too often but most people aren't posting how much their income and available credit card limits are, however, if she is not using the credit responsibly and is overcommitting herself then it is definitley a problem that will need addresses. The thing is, you realising there is a problem is very different from her realising there is a problem - how does she treat all this? Presumably she speaks openly to you about if you know details?

You might like to have a look at the thread on Barclaycard limits - it had a number of people post with income and available credit figures. You might also find more info on the loans and debts board too.

G

mgr1970

Hi Gal

The ratio's seem very high to me, but when you read a lot of the stoozing threads they also seem to be high which is something i have always found strange in my good old days we started to worry about ratio's when they reached 40% of income it then started to creep above 50% but never did i see an available credit to income ratio above 100% of income but from what i can make out now they must be using the Total minimum payment to income ratio or how could they justify allowing these ratio's.

Galstonian

I don't know is the honest answer but the limits are definitely high for moderate earners (many example of individual cards approaching 100% of salary) which is ludicrous when you think about it. Being able to walk into a shop and swipe your whole years wage in one go.

I think comparing "normal" borrowers to stoozers may be misleading because they are deliberately trying to push the envelope and are using tricks - like knowing which CRAs are used by which lenders for searches, asking for "matching" of credit limits and exchanging information on who gives the largest limits.

Not that this absolves the lenders in any way. I think stoozers take advantage of the fact that lenders just seem to be prepared to go further than ever before. Meanwhile many people should not be getting offered this amount of available credit, it is extremely worrying. If they take advantage of it and we (as a country) hit any economic problems it looks like a bombshell just waiting to go off.

There is a greater acceptance of debt and being in debt is not something that carries the same social stigma that it used to ( no longer the "never never"). That is not always the fault of the individuals, if you are a young recently qualified professional you will almost certainly start in debt and that is my biggest bugbear with student loans. Is the amount contributed back to education by these payments worth the fact that it means we have a generation who don't really see why they should save for anything and are happy to borrow on stored cards, credit cards and then go on to take out hugely inflated mortgages "to get on the property ladder"? I worry that it is shortly going to turn into the the property helter-skelter. Lets not even begn to ask about long term savings, retirement planning or pensions...

I'm going to ask Martin if he has any figures for this and if not it might be an idea of a poll on the site (have to admit I don't always look at the polls, it may even have been done already).

scattycat_3

Hi Gal,

The ratio will be difficult to quantify, as time is a factor.

Over a period of time and with regular use, credit limits are almost automatically increased.

My totalled limits are approaching five times my income, because of a good payment history. This does not mean I am going to rush out and spend it all. I use the freezer or fridge analogy. Having a full cold food store, does not mean you are going to empty it by gorging for the sake of it, you eat to live.

The fact that your sis has two MBNA cards, mgr will exagerate the total, as they are the most liberal.
Regards Scat
PS., the Western Isles are really beautiful

Galstonian

But, unlike a freezer full of food, you haven't already paid for the credit available to you. If disaster struck and you lost your job would you be tempted to use credit cards to survive in the hope that things would return to normal? And if they didn't get back to normal where would that leave you? The problem is that the responsbile and reasonable use of credit cards (and other credit) usually means that you don't have five times your income available, why would you if you are never going to use it? I know, there are many people who probably have credit cards that they do not use which are still active but I think there are many others who simply have too much available credit who pay a lot for carrying balances every month. They are not usually the kind of people you find on this forum until it reaches some kind of breaking point. There are plenty of examples that crop up both on this board or the loans and debt board; some people simply have more credit than they can deal with. I am not an advocate for making credit more difficult to get, I have always said I think basic financial management should be a part of the school curriculum, I think people should be able to understand exactly what they are getting themselves into. Unfortunately I am also sure there will be a number who do not care who simply live for today, damn the consequences. Again, I do not absolve the lenders of a responsibility. They can see what credit you have access to, they should not automatically increase credit limits unless the customer at least agrees. They should reduce unused credit and request closure of dormant accounts (again, upon customer agreement, I'm not saying remove that "for emergency" card).

The one thing for sure is it is a mess and doesn't appear to be getting better.

Margaret_Millne

I totally agree with Galstonian's above comments.  However, when our business was going through a particularly bad patch we had virtually no income from it for almost 2 years, and we had no option but to use the Credit Cards to survive.  At one point we were even meeting the minimum payments by balance transferring between cards, and we did get into a lot of debt.

In our defence I have to say we do have a house worth in excess of £750k, which is 10 times what we paid for it - albeit 23 years ago, with no mortgage, so if push came to shove we could downsize considerably and pay off the cards.

We now have all cards at less than 7%, and most at between 0% and 3.9%, and are clearing them slowly but surely.

We now have an income from the business again, so we can live, and reduce the debt.

I certainly would not suggest our strategy for everyone, but in our particular case it got us through a very sticky couple of years.

As I say, with the house, and our large potential pensions which we can choose to take in full or in part at any time, we knew it was a situation we could get ourselves out of at any time.

As Martin is often heard to say, debt in itself is not bad, as long as it is well thought out, cheap, and affordable, which ours now is.

In relation to the original question, by the way, our available credit is 3-4 times our income, although we are nowhere near maxed out, and keep the cards for bouncing to take advantage of cheap BT offers.