How Credit Cards and BNPL Quietly Kill Your Borrowing Power
That credit card you never use and the Afterpay account you forgot about could be costing you tens of thousands in borrowing power. Here's how.
You earn good money. You've saved a solid deposit. You've never missed a payment. You walk into the bank expecting to borrow $600,000 — and they come back with $520,000. What happened?
In most cases, the answer is debt you didn't know counted.
How banks actually count your credit card
When a bank assesses your mortgage application, they don't care that you pay your credit card off in full every month. They care about your credit limit.
Here's the formula most NZ banks use: they treat 3–5% of your total credit card limit as a monthly liability. So if you have a $15,000 credit card limit — even with a $0 balance — the bank counts $450–$750 per month against your borrowing capacity.
That $450–$750 per month translates directly into borrowing power. At a 7% stress-test rate over 25 years, every $100/month of liability reduces your maximum loan by roughly $14,000. So that unused $15,000 credit card? It could be costing you $63,000–$105,000 in borrowing power.
Most people have no idea this is happening until they're sitting in front of a bank and hear a number much lower than they expected.
Buy-now-pay-later is even worse
Afterpay, Laybuy, Zip, Humm — they all count against you. Banks and brokers now routinely check for BNPL activity. Some banks treat any active BNPL account as a sign of financial stress, regardless of the balance. Others apply a monthly liability figure based on your BNPL limits.
The particular sting: even if you close a BNPL account, the transaction history stays on your bank statements. When a bank reviews your spending, they'll see the payments and may ask about them. If you've been using Afterpay regularly for everyday purchases, it can raise questions about your spending discipline — fairly or not.
The debt-to-income ceiling
New Zealand's RBNZ debt-to-income (DTI) restrictions add another layer. For owner-occupiers, total debt (including your new mortgage) generally can't exceed 6× your gross annual income. Every dollar of existing debt — car loans, personal loans, student loans, credit card limits — eats into that cap.
Here's a real scenario:
- Household gross income: $140,000
- DTI cap: $840,000 (6×)
- Car loan: $18,000
- Credit card limit: $10,000 (counted at face value for DTI)
- Available for mortgage: $812,000
But if you also have a $5,000 Afterpay limit and a $12,000 personal loan, your available mortgage drops to $795,000. These seemingly small debts compound quickly against a fixed ceiling.
What you can do about it
The good news: these are fixable before you apply.
- Reduce credit card limits. Call your bank and ask to lower your limit to the minimum you actually need. If you don't need the card at all, close it — but do this at least 3 months before applying for a mortgage.
- Close BNPL accounts. Pay off any outstanding balances and formally close the accounts. Stop using them at least 3–6 months before your mortgage application.
- Pay off small debts. A $3,000 personal loan might seem insignificant, but eliminating it could unlock $40,000+ in borrowing power.
- Know your DTI position. Calculate your total existing debt against your gross income. If you're close to the 6× limit, reducing debt before applying is more valuable than saving a slightly larger deposit.
See the impact yourself
MortgageReady's What-If Optimiser shows you exactly how each debt affects your borrowing power. Enter your credit cards, loans, and BNPL balances, and the app calculates how much more you could borrow if you reduced or eliminated each one.
It also flags the highest-impact changes — so you know whether to prioritise paying down the car loan or closing the credit card first.
Create a free profile and see how your existing debts are affecting your mortgage position — you might be surprised by the numbers.