Using credit cards to save for a deposit - good/bad idea?

[Mark Rocks]

We've had a question come through on Youtube this week, and I'm interested in hearing what the forum thinks.

"Is it possible to pay your bills off using a credit card for few months, and using the money saved in your current account for a BTL deposit? How will lenders look at this if you manage to stay below 30 percent on credit card usage? Thanks."

Would you endorse this method of saving for a deposit, or do you think it would cause more stress in the long-run?

 

[Giles S]

The wife and I did just this when relocating, we both had excellent credit rating and were able to get interest free on purchases. We literally bartered them, then used the cash we didn’t spend as a deposit on our next home turning our previous into ctl then full btl later on.

it worked for us but we were buying residential and this was our only debt (other than mortgage). I’d do it again if I had to, at the time we couldn’t sell, we’d relocated and were expecting so needed to do something.

[Julia Urquhart]

I wouldn't recommend this - has the potential to go horribly wrong and once you mar your credit record it may take a long time to recover.

By all means use a credit card judiciously, but better to cut your spending to save for the deposit. Paying bills on it is only putting off the time when you have to pay the debt.

[Giles S]

If the circumstances fit, I think it’s fine. As you say it’s high risk and you need to be fully aware of this, but we could more than afford the payments on both mortgages and the cc, just didn’t have the time to save a deposit.

We did cut spending and saved, and continued to do do so after purchase but then rather than use this for the deposit we paid off the cc that allowed us to save the deposit in half the time when needed.

As I said we had no other debt so we were just releasing our previous good habits.

speaking with friends, most have a cc debt or a Hp/lease agreement for something and still get a mortgage, using the cc was just a way of putting us back to similar short term debt levels as them. The difference was we had an extra appreciating asset with ours rather depreciating asset they had.

As I say if the circumstances if the circumstances are right it’s fine.

[EvolutionBlogger]

It all depends on how much credit card debt you take, and how much money you earn. As long as you earn enough to pay back you credit card debt, you should be fine.

For me, I've used credit cards for short term cash flow when I need to close a deal. 

Debt is an amazing tool, when used responsibly. It's a little like beer! Great in small quantities. Disastrous if you have too much!
 

[russiansergey]

@richard brown Iam really interested in your upcoming book.

Iam really enjoying your podcast and can't wait to purchase your book.

May I ask when it's going to be released as Iam eager to read it ASAP.

[Stephen clay]

It’s how we got the remainder of our deposit.   Didn’t spend a penny of our money for three months and banked it apart from a few outgoings like mortgage etc.  We took out three credit cards but spent nearly 4 months living like students.  It gave us the deposit we needed.   It’s sooo important to then pay the bad dept off as fast as possible.    As previously said it all depends on your personal finances.  We are now heading. For property 5.    

[EvolutionBlogger]

1 hour ago, Stephen clay said:

It’s how we got the remainder of our deposit.   Didn’t spend a penny of our money for three months and banked it apart from a few outgoings like mortgage etc.  We took out three credit cards but spent nearly 4 months living like students.  It gave us the deposit we needed.   It’s sooo important to then pay the bad dept off as fast as possible.    As previously said it all depends on your personal finances.  We are now heading. For property 5.    

Sometimes you need to get scrappy to get ahead

[russiansergey]

@richard brown thank you so much for your response, I really appreciate it.

Iam going to drop an email to Karen immediately , I want to be the first to grab your book.

You mentioned in your latest podcast episode that In your new book you will be talking about private financing raise, funding investment activities.

That is going to be very interesting