Early Retiree Credit (Card) Limits?

[Midpack]

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

 

[heeyy_joe]

Not sure, but usually an investment account statement or tax return copy will do the trick.

 

[daylatedollarshort]

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.

 

[Ready]

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.

 

[heeyy_joe]

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.

 

[Ronnieboy]

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.

 

[samclem]

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.

 

[grasshopper]

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

 

[Midpack]

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...

 

[Tom52]

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.

 

[rodi]

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.

 

[daylatedollarshort]

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.

 

[ERD50]

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.

-ERD50

 

[Lakedog]

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.

 

[daylatedollarshort]

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.

 

[rbmrtn]

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.

 

[BellBarbara]

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.

 

[JOHNNIE36]

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.

 

[gromit]

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".

 

[UserRequested]

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

 

[UserRequested]

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.

You just need to be vigilant against fraudulent transactions on your card. Make sure you understand the disputes and chargebacks conditions on your card.
Obviously the higher the limit, the larger the potential $ fraud on your card.

Most card issuers will reverse the charge if you reported a stolen card in a timely manner , or disputed any "card not present" transactions early.

 

[Koolau]

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.

Never actually tried this, but another way to get your FICO score up (I'm speculating) would be to pay off your CC bill "in advance". When we sought a mortgage, we had a great score (around 820) but we found out it would have been even higher had we not used so much of our outstanding CC limit for our monthly transactions (roughly $5k out of $15K). Even though ALWAYS paid in full at the end of the month, the ratio cost us FICO score! We had very little income, so getting a higher limit would likely have been arduous, though not impossible. Here is what I speculate would be an EASY way to raise FICO score: "Cash" in a checking account, bank account or other (no longer) interest producing vehicle could be sent to the CC company a month before it is used. It's the reverse of the "float", but costs you virtually nothing since you no longer earn any interest to lose. BUT, now the rating agencies see that your ratio of debt to available credit is suddenly virtually nil. Your score should go up. Never actually tried it, but I feel certain it would work. While working this little piece of "magic" you could be attempting to get your credit limit increased if you really want to. YMMV

 

[JakeBrake]

April through June will be a good time to charge home improvements to your credit card(s).

Discover Card is offering 5% cashback on home improvements (whatever that means). If I do anything serious, I will call Discover for clarification.

Chase Freedom is offering 5% cash back at Lowes.

 

[daylatedollarshort]

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.

We were denied a card one time because we had too high of limits on our other cards, which had been raised without our asking. I got the new card by having the other card limits lowered. There is not an infinite amount of unused credit one can have available and still get more. Credit ratio is one of many factors that go into a person's FICO score.

I am not sure what you mean by times have changed. We have very high credit scores. I monitor our FICO scores very closely.

 

[Katsmeow]

In general, it is usually a bad idea to close credit cards or get limits lowered particularly if you use your other cards - even if paid off in full.

That is, someone who has $20,000 of total credit limits available and spends $5000 this month on Amex, gets the bill and pays it promptly will show on a credit report as having 25% credit utilization.

The person who has $100,000 of total credit limits available in the same situation has 5% credit utilization. This person will - all things being equal - have a higher credit score than the first person.

I have for many years always paid my Amex charges online before they are billed. I spend way more each month than actually ever gets billed so my credit utilization always looks great.

For the OP's question - I just include in any income questions the amount of DH's withdrawals from his IRA. We also used that in obtaining a mortgage last year (this needed to be set up as a regular automatic withdrawal and there had to be at least enough in the IRA to cover 3 years of payments).