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Early Retiree Credit (Card) Limits?
Old 04-04-2013, 03:30 PM   #1
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Early Retiree Credit (Card) Limits?

We never pay interest on credit cards, but we like the convenience and the cash back like most. We've just begun a full kitchen remodel, that will probably be paid for in three chunks, so I thought why not put as much as possible on the CC for the cash back.

So I called the CC folks and asked to increase our credit limit. Of course they asked what my income is, and since I have no pension or Soc Sec (yet), I have NO wage income. I was a little thrown, as I hadn't thought about it after more than 35 years with income. Fortunately DW still has a small wage income, and they increased the limit on that basis.

But when DW retires in the next year or two, we'll have NO income!

What am I missing, in terms of CC limits in case we ever want another bank CC? Denied for life, or until age 70 with Soc Sec
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Old 04-04-2013, 03:40 PM   #2
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Not sure, but usually an investment account statement or tax return copy will do the trick.
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Old 04-04-2013, 03:48 PM   #3
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I am not sure about credit cards, but I did ask about buying a second house before our first one is sold at the local credit union and if they would count any of our savings since it would double our mortgage payments. I was told that if we set up monthly distributions from our retirement accounts they would count that as income. Otherwise they don't look at assets. It is all very strange from a logic stand point. If you have a million times your mortgage amount in savings I guess that doesn't count, but if you have monthly income from an unstable job in a dying industry you can spend half of it (half!) on your mortgage payments and that is just fine.

I asked if they had to see some sort of plan that we wouldn't run out of money from these monthly distribution, and they told me we needed to have enough to cover three years worth of withdrawals. I am not sure why three years would be good for a thirty year loan. I guess they plan to sell the loan before three years are up so what do they care if we can make the payments in years 4 - 30.
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Old 04-04-2013, 03:57 PM   #4
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Credit card companies are not equipped to do deep financial analysis. They go by FICO scores and monthly income only. Since a very small percentage of the world has amassed enough money to live comfortably without working prior to age 65, it's probably not worth their time to add this level of complexity into their systems.

I have one card that I do use for business with a high limit, and I was able to get them to look at my overall balance sheet, but it took several years of doing business with them, and many phone calls to the various credit departments before I could find someone willing to talk to me. In general AMEX is more geared to have these types of conversations than Visa or M/C.
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Old 04-04-2013, 04:09 PM   #5
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Originally Posted by Ready View Post
Credit card companies are not equipped to do deep financial analysis. They go by FICO scores and monthly income only. Since a very small percentage of the world has amassed enough money to live comfortably without working prior to age 65, it's probably not worth their time to add this level of complexity into their systems.

I have one card that I do use for business with a high limit, and I was able to get them to look at my overall balance sheet, but it took several years of doing business with them, and many phone calls to the various credit departments before I could find someone willing to talk to me. In general AMEX is more geared to have these types of conversations than Visa or M/C.
+1

Having a steady relationship helps as does pressing on until you can get to a "real" decision maker that can handle exception cases.
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Old 04-04-2013, 04:14 PM   #6
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I would think you could state your annual withdrawals as your annual 'income'. I've never had a card company ask for copies of pay-stubs, tax forms, etc. to verify income.
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Old 04-04-2013, 04:27 PM   #7
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Originally Posted by daylatedollarshort View Post
I was told that if we set up monthly distributions from our retirement accounts they would count that as income.
I was surprised to read this, as my experience was a lot different when I went down a similar road for my MIL (see thread here). It's absolutely not possible to use an IRA or 401K as collateral for a loan, but maybe some places will let you use it to demonstrate the ability to generate monthly income. Seems sketchy to me--what's to stop the owner from withdrawing everything the next day? If the bank puts a hold on the money, then it's definitely collateral.
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Old 04-04-2013, 04:29 PM   #8
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I always use line 37 on my 1040 as my income, the last CC I received gave me a $20K credit limit. Now when this year with ACA kicks in I can maybe get a $1500 limit. Great
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Old 04-04-2013, 04:42 PM   #9
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Originally Posted by heeyy_joe View Post
Having a steady relationship helps as does pressing on until you can get to a "real" decision maker that can handle exception cases.
I did have to talk to a "Supervisor" to get our limit increased (just over doubled), so our experience confirms this...

Something to consider for those who haven't pulled the retirement plug yet, forming a new "steady relationship" with a CC company may be tough once you retire - I hadn't considered that before I retired...
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Old 04-04-2013, 04:47 PM   #10
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Maybe I should try to ask my credit card company to increase my credit limit while I'm still working, I doubt if they come back after I retire to determine if I still have a paycheck. I assume at that point they will only be interested whether or not I can make the minimum payment.
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Old 04-04-2013, 05:44 PM   #11
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Originally Posted by daylatedollarshort View Post
I am not sure about credit cards, but I did ask about buying a second house before our first one is sold at the local credit union and if they would count any of our savings since it would double our mortgage payments. I was told that if we set up monthly distributions from our retirement accounts they would count that as income. Otherwise they don't look at assets. It is all very strange from a logic stand point. If you have a million times your mortgage amount in savings I guess that doesn't count, but if you have monthly income from an unstable job in a dying industry you can spend half of it (half!) on your mortgage payments and that is just fine.

I asked if they had to see some sort of plan that we wouldn't run out of money from these monthly distribution, and they told me we needed to have enough to cover three years worth of withdrawals. I am not sure why three years would be good for a thirty year loan. I guess they plan to sell the loan before three years are up so what do they care if we can make the payments in years 4 - 30.
I read that under the new rules (post housing collapse) the banks are on the hook for the loans for the first 3 years. They can sell them off sooner - but if the borrower defaults - it gets dumped back on the issuing bank.

This improved underwriting from about 90 days solvent, to 3 years solvent.
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Old 04-04-2013, 05:47 PM   #12
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I read that under the new rules (post housing collapse) the banks are on the hook for the loans for the first 3 years. They can sell them off sooner - but if the borrower defaults - it gets dumped back on the issuing bank.

This improved underwriting from about 90 days solvent, to 3 years solvent.
That is pretty funny. I was just guessing at why they told me three years of savings for a thirty year loan. I guess this means we should all be careful still if we buy investment products based on any kind of pooled mortgages.
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Old 04-04-2013, 05:48 PM   #13
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IIRC, when I had asked to have my CC limit raised substantially (kid's school accepts my Fidelity 2% Rewards Card), I just gave them the AGI from the most recent taxes. I don't even think they asked for any proof.

If you have a good credit record, I think they just need a number to enter on their form. That was my impression.

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Old 04-04-2013, 05:59 PM   #14
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Most credit cards I have offer to increase the credit limit every year or two, and I assume this is primarily due to credit score and paying the balance monthly. In fact, since I retired five years ago, Penfed has slowly raised my limit from the initial $12k to $35k without a single request from me. I rarely have monthly charges over $2500 but it doesn't bother me if they want to increase the limit since there might be a time when I would want to use it.
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Old 04-04-2013, 06:12 PM   #15
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I have called a number of time to have our credit card limits lowered. I remember one customer service person laughing because she had never gotten a call like that before.

I just don't want any big credit limits interfering with refinancing or getting another card with a better cash back offer.
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Old 04-04-2013, 06:48 PM   #16
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Originally Posted by grasshopper View Post
I always use line 37 on my 1040 as my income
That's roughly what I did last time. I got a new one because the old one had reduced their cash back rewards. Did it online and it was approved in the same process.
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Old 04-04-2013, 07:17 PM   #17
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I just got two new credit cards. when they asked income I gave them the amount we take from our accounts each year - 75K. That is income. No issues, I got the cards.
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Old 04-04-2013, 07:24 PM   #18
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Originally Posted by daylatedollarshort View Post
I have called a number of time to have our credit card limits lowered. I remember one customer service person laughing because she had never gotten a call like that before.

I just don't want any big credit limits interfering with refinancing or getting another card with a better cash back offer.
This is one sure way to get your credit score lowered. Times have changed. Now the credit companies look at the credit ratio, or the amount of available credit you have. The lower the ratio, the lower your score and that is why I go to all the card companies every year and get my credit limit raised.
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Old 04-04-2013, 07:49 PM   #19
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If you have a credit limit of $10k and wanted to spend $15k in one month in two transactions of $8k and $7k, could you charge the $8k, go online and immediately pay $8k, and then charge the $7k a few days later after the $8k payment has posted? That would let you get cash back on the entire $15k, even though the credit limit is $10k. I know AmEx allows 4 or 5 payments anytime during the statement period. I've never tried this strategy, so "buyer beware".
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Old 04-04-2013, 07:51 PM   #20
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If you have a credit limit of $10k and wanted to spend $15k in one month in two transactions of $8k and $7k, could you charge the $8k, go online and immediately pay $8k, and then charge the $7k a few days later after the $8k payment has posted?
Yes
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