Up your credit limit to avoid card charges

SM writes from Mayo: I have an Ulster Bank credit card, which I pay in full each month by direct debit. I have at times exceeded the credit limit without my knowledge, resulting in a charge of €8.50 each time. I think it is unfair because the bank does not warn me or stop me from using the card when I go over the limit. If I have big purchases, and know I will exceed the credit limit, I make sure to transfer funds to the card account in advance. Do you think I could claim the charges back?

Banks would claim the charges are spelt out in your card agreement while your monthly statements list the credit limit, the balance outstanding and the due date for payment — so your chances of a refund are slim.

Ulster Bank said it allows customers to keep track of their card spending online to ensure they do not exceed their limits. “We do not alert customers prior to a transaction which would exceed their credit limit,” it said. “Our terms and conditions state the customer must make sure that, in using the card, the credit limit is not exceeded.”

Banks have a choice when a purchase takes you over your credit limit. They can decline the transaction, risking inconvenience and embarrassment for you and a lost opportunity for them to earn commission on the sale. Approving the transaction is much more attractive for the bank, especially for customers such as yourself who can be relied on to pay their balances on time, including the charges for exceeding credit limits. Banks would be less accommodating with problem customers, whose cards would probably be declined as soon as they hit their limits.

In other countries, banks would automatically increase credit limits for good customers who occasionally max-out their cards. This is not possible in Ireland because the Central Bank’s consumer protection code prohibits card issuers from increasing credit limits unilaterally. This makes you an unintended victim of a well-meaning measure, designed to stop cardholders from biting off more debt than they can chew. Unless you ask, Ulster Bank cannot get a higher credit limit, even though you could afford it and it would stop you incurring fees unnecessarily.

You should consider asking for a higher limit to prevent this problem from recurring.

Mortgage minefield

EL writes from Dublin: A friend who moved to America wants to buy a house in Ireland with a view to returning to live here at some point in the future. What are his chances of getting a mortgage from an Irish bank?

Buying a house has been more difficult since earlier this year when the Central Bank tightened lending rules to prevent another credit bubble, especially if the property will not become your home until some time in the future. The new rules require most of those buying non-primary dwelling homes — a definition that includes buy-to-let properties, holiday homes and house purchases by expats — to have mortgage deposits of at least 30%.

Garry Manning of OMAC Mortgages & Finance, a broker in Clondalkin, Co Dublin, said banks tend to be even more strict in practice. “The rules say 70% but non-residents would struggle to get approval for more than a 60% mortgage,” he said. Banks might also require that non-resident buyers be citizens of Ireland or Britain or have strong family or cultural links with Ireland.

Even if your friend could afford the deposit, he would have to earn enough to pay his mortgages in Ireland while continuing to live comfortably in America. “Non-residents would probably need to earn at least €75,000 to qualify for a mortgage in Ireland,” Manning said.

Suppose your friend wants to borrow €200,000 over 20 years. The payments would be €1,265 a month at current variable rates of about 4.5%. Lenders would need to be satisfied he could afford the mortgage if interest rates rose by two percentage points, increasing the payments to about €1,491 a month.

“He would have to show he could afford €1,500 a month after paying rent and all the other expenses needed for a comfortable life in America,” Manning said. “He would need to show he has been able to save €1,500 a month for at least a year — not just for the past few months.”

Health boost

AC writes from Dublin: I am 49 and took a career break in July 2014 for 12 months. I had private health insurance since childhood but gave it up for the career break because I could not afford the premiums. I hope to rejoin after I return to work but I am worried about having to pay an insurance loading under lifetime community rating (LCR) by missing the April 30 deadline. It seems unfair, after paying insurance all of my life, to be penalised for choosing the “wrong” year to take a break.

You should have nothing to worry about, according to the Health Insurance Authority, whose online calculator at hia.ie indicates there would be no late-entry loading when you decide to resume cover.

At first glance, it appears you could be caught out by LCR because you are over 34 and you missed the April 30 deadline for buying insurance or renewing cover that has lapsed. The loading for somebody buying insurance at 49 would add 30% to the premium — 2% for each year over the age of 34.

However, you are entitled to a credit for the cover you had in the past. If you had insurance for seven years before your career break, for example, the loading would be reduced from 30% to 16% because you would be deemed to be buying cover at 42 — seven years younger than your actual age.

You are entitled to a more substantial credit but it would be impractical to expect you to come up with the paperwork needed to prove you have had insurance since childhood. This is why you will be given the benefit of the doubt.

In examples provided by the Department of Health, you would get a credit for 26 years.

This would reduce your age for LCR purposes to 23, providing a comfortable margin of safety before you would have to worry about late-entry loadings.