Retired applying for credit cards

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Da5id
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Retired applying for credit cards

Post by Da5id » Wed Oct 17, 2018 9:09 am

I was (happily) laid off some months back and am currently in the "could comfortably afford to be retired if I want to" position. I'm enjoying myself and keeping busy, if I get bored/antsy I may go look for work.

That said, I haven't applied for any credit cards while without a job. I enjoy playing the "credit card bonus" game, and am wondering what peoples experience is applying for cards without employment/income. I don't have lots of taxable income, as other than some real estate earnings my money is pretty tax efficiently placed. I can adjust my income as needed with Roth conversions, but as I may be on an ACA plan next year I probably will keep my income on the lower side.

Any thoughts/comments on those who do this while without a job? How do credit card companies view people with lots of assets and little income? Is it helpful to trim some of my current card limits, which are rather higher than my needs?

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midareff
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Re: Retired applying for credit cards

Post by midareff » Wed Oct 17, 2018 9:14 am

They ask about income and don't specify "taxable" .. :-). I've been reired 7 years and play the credit card games too. I found they can't issue them fast enough as long as you have a strong FICO.

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Hyperborea
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Re: Retired applying for credit cards

Post by Hyperborea » Wed Oct 17, 2018 9:17 am

I've had no problem getting credit cards after I retired even premium credit cards (AmEx Platinum with a 100K point sign on bonus). I've listed retired and put down an income that was my yearly withdrawal from my portfolio.
"Plans are worthless, but planning is everything." - Dwight D. Eisenhower

Jazzysoon
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Re: Retired applying for credit cards

Post by Jazzysoon » Wed Oct 17, 2018 9:47 am

I took a buyout in March, not sure either if I'll stay retired, but had no problem in August getting a Fidelity 2% cash back card. As previous poster mentioned I listed my income as what I withdraw.
I use my new card exclusively now, tomorrow Thursday is OP Day at groc store - 10% off, so I will save 12% on groceries!!!

MandyT
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Re: Retired applying for credit cards

Post by MandyT » Wed Oct 17, 2018 2:03 pm

I'm pretty early in retirement, and I have a relatively small amount of my savings in retirement vehicles compared to taxable. My understanding of the rules is that I can count my smallish pension and interest/dividends in my taxable accounts, but not withdrawals from principal in taxable (though I think all withdrawals from retirement accounts would count). I don't expect to make withdrawals from my retirement accounts for quite some time, so my listed income is pretty modest ($3x,xxx). You mention Roth conversions; it would be nice if those counted (since I made one this year and plan to make more going forward), but my sense is that they don't.

My first post-retirement application for a new credit card was for the Chase Sapphire Reserve early in 2018. My application resulted in a phone call with a representative who balked slightly at my income. When I said I had no objection to reducing the credit line on one of my other Chase cards to make credit available for the CSR, he sounded a little relieved. So I was glad I had researched that possibility.

I recently closed one of my other Chase cards and was able to keep my total credit the same by increasing the credit limit on the CSR by the limit on the closed card--that happened instantaneously and was a non-issue. So my anecdata says that, as long as you have good credit scores, you should be fine making changes that don't increase your credit exposure, but it might be hit-or-miss getting new credit. If you're more aggressive than I was with respect to what to list as your income, your results might be better.

My main takeaway is that a retiree should avoid closing a credit line if possible--it's better to downgrade the card or combine credit lines if possible. To extend that line of thought, it might not be a bad idea for people planning to retire in the new future to preemptively increase their credit exposure.

prairieman
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Re: Retired applying for credit cards

Post by prairieman » Thu Oct 18, 2018 4:10 am

I have a small pension and live mostly off withdrawals from a taxable brokerage account. When they asked for income I just estimated the total amount, rationalizing that our portfolio balance increases most years despite the withdrawals. If they want to question or deny, well, so what? We recently obtained two good cash-back cards with no questions asked, although our credit score dropped temporarily after each application.

MikeG62
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Re: Retired applying for credit cards

Post by MikeG62 » Thu Oct 18, 2018 6:19 am

Hyperborea wrote:
Wed Oct 17, 2018 9:17 am
I've had no problem getting credit cards after I retired even premium credit cards (AmEx Platinum with a 100K point sign on bonus). I've listed retired and put down an income that was my yearly withdrawal from my portfolio.
I do pretty much the same thing. Only once I was asked to supply proof - this was the Allianz Signature VISA. They wanted copies of my tax returns. I told them to kill the application. Aside from that, no other CC company has asked for proof. Leasing another car next month (entered into one lease last July) and here too no ask for proof of income. I did wonder if they might/would, but they did not. FICO score is >800 so probably helps assuage any concerns.
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Da5id
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Re: Retired applying for credit cards

Post by Da5id » Thu Oct 18, 2018 12:54 pm

Thanks for the feedback, much appreciated. When I find a card that seems useful I'll give it a whirl. Just was a little confused on the whole "income" thing.

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GerryL
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Re: Retired applying for credit cards

Post by GerryL » Thu Oct 18, 2018 1:00 pm

I retired a little over 4 years ago. Just got my first SS payment yesterday. In between I was living off severance and had almost no income. I managed to get two new credit cards in the interim, but I wasn't "playing for rewards." Having a high credit score probably helps.

mptfan
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Re: Retired applying for credit cards

Post by mptfan » Thu Oct 18, 2018 1:14 pm

MandyT wrote:
Wed Oct 17, 2018 2:03 pm
My understanding of the rules is that I can count my smallish pension and interest/dividends in my taxable accounts, but not withdrawals from principal in taxable (though I think all withdrawals from retirement accounts would count).
What is the source of that understanding?

MandyT
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Re: Retired applying for credit cards

Post by MandyT » Thu Oct 18, 2018 7:10 pm

mptfan wrote:
Thu Oct 18, 2018 1:14 pm
MandyT wrote:
Wed Oct 17, 2018 2:03 pm
My understanding of the rules is that I can count my smallish pension and interest/dividends in my taxable accounts, but not withdrawals from principal in taxable (though I think all withdrawals from retirement accounts would count).
What is the source of that understanding?
I've tried to go to the "horse's mouth" by finding the applicable parts of the CARD Act of 2009 as amended by the CFPB in 2013, but there's a lot of gobbledygook to sift through.

Section 109 of the CARD Act put the onus on credit issuers to consider the ability of consumers to make required payments. This is an amendment to Chapter 3 of the Truth in Lending Act. There were some subsequent amendments, including one that permits adults to be granted credit based on income of spouses or domestic partners, but I haven't yet found chapter-and-verse (if it exists) of what precisely counts for income.

In cases when a law or regulation is vague, entities that need to stay within the rules frequently take a more conservative stance so they will know they are not breaking the rule. It then becomes more a matter of what the credit card companies think the rules are than what the law actually says. Some of those policies are listed here:

https://millionmilesecrets.com/guides/w ... lications/

None of these list drawdown of savings or taxable investments. Certainly, an applicant could be more aggressive based on what they could derive annually by drawing down their portfolio, but I am going to try to avoid doing this myself because I don't want to spend the time and energy to argue the point if it comes to that.

mptfan
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Re: Retired applying for credit cards

Post by mptfan » Thu Oct 18, 2018 7:21 pm

MandyT wrote:
Thu Oct 18, 2018 7:10 pm
mptfan wrote:
Thu Oct 18, 2018 1:14 pm
MandyT wrote:
Wed Oct 17, 2018 2:03 pm
My understanding of the rules is that I can count my smallish pension and interest/dividends in my taxable accounts, but not withdrawals from principal in taxable (though I think all withdrawals from retirement accounts would count).
What is the source of that understanding?
None of these list drawdown of savings or taxable investments.
Actually, they do. The list under the American Express heading includes "retirement income," and the list under the Chase Sapphire Preferred includes "Investments," and those things can include principal withdrawals from taxable accounts. Certainly those things are not excluded.

Also, if it comes to that, you don't have to spend any time and energy arguing anything, you can just abandon the application.

MandyT
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Re: Retired applying for credit cards

Post by MandyT » Thu Oct 18, 2018 8:08 pm

mptfan wrote:
Thu Oct 18, 2018 7:21 pm
Actually, they do. The list under the American Express heading includes "retirement income," and the list under the Chase Sapphire Preferred includes "Investments," and those things can include principal withdrawals from taxable accounts. Certainly those things are not excluded.

Also, if it comes to that, you don't have to spend any time and energy arguing anything, you can just abandon the application.
You could be right on the former point, though it might be a stretch to call withdrawals from taxable "retirement income". On the latter point, though, I don't think it's farfetched that I could be granted credit and then later be subjected to a financial review for some reason. Even if it would be no big deal, I feel more comfortable staying within the zone in which I'm confident that my answers to their questions would pass muster.

You asked for the source of my understanding, and I provided it. I already noted that my approach may be overly conservative.

TravelGeek
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Re: Retired applying for credit cards

Post by TravelGeek » Thu Oct 18, 2018 8:14 pm

MandyT wrote:
Thu Oct 18, 2018 7:10 pm
None of these list drawdown of savings or taxable investments. Certainly, an applicant could be more aggressive based on what they could derive annually by drawing down their portfolio, but I am going to try to avoid doing this myself because I don't want to spend the time and energy to argue the point if it comes to that.
In theory you could convert your savings or taxable investments into an income stream via an annuity. I assume that would then count? I am not suggesting that this is actually advisable to do for the sake of credit card applications, but unless a card application explicitly defines the “income” value to be provided, I might use that justification mentally to keep myself from feeling bad about counting drawdowns as income.

mptfan
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Re: Retired applying for credit cards

Post by mptfan » Thu Oct 18, 2018 8:25 pm

MandyT wrote:
Thu Oct 18, 2018 8:08 pm
You asked for the source of my understanding, and I provided it. I already noted that my approach may be overly conservative.
Fair enough. My only point is that there are no rules when it comes to what forms of income can be considered when filling out a credit card application.

And I don't think it's a stretch to consider withdrawals of principal as retirement income. One of the most important principles of being a Boglehead (and being wise about investing in general) is to live below your means and save a certain percentage of your income while working so that you can use those savings, including withdrawals of principal, as a form of retirement income after retiring.

MandyT
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Re: Retired applying for credit cards

Post by MandyT » Thu Oct 18, 2018 8:38 pm

In reply to the previous two posts: I'm frugal enough that I'm currently really not drawing down my portfolio very much, so I don't see the point of exaggerating my income to get more credit I don't really need! If I wanted to get into churning, that would be different, but I don't really have the temperament for that, and there aren't any cards I'm itching to get right now.

And I completely understand that, for Bogleheads, arguably the main reason for saving and investing is to use your portfolio for retirement income, but the CARD Act (the 2009 timing is very telling) is written to protect consumers, most of whom are non-Bogleheads, from themselves. I just don't want to fight some bureaucrat who was instructed to use a conservative formula for income that was written by a company to avoid running afoul of the CARD Act.

mptfan
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Re: Retired applying for credit cards

Post by mptfan » Thu Oct 18, 2018 9:12 pm

MandyT wrote:
Thu Oct 18, 2018 8:38 pm
I just don't want to fight some bureaucrat who was instructed to use a conservative formula for income that was written by a company to avoid running afoul of the CARD Act.
You are entitled to use a conservative interpretation of the phrase "retirement income," but to suggest that "bureaucrats were instructed to use a conservative formula for income" without a basis for saying that I think goes too far.
Last edited by mptfan on Fri Oct 19, 2018 8:10 am, edited 2 times in total.

RetiredAL
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Re: Retired applying for credit cards

Post by RetiredAL » Thu Oct 18, 2018 9:59 pm

DaSid

Just a few years ago, my then 90 year old Dad and I walked into his local Wells Fargo Bank, with whom we both have checking and savings, to open a new joint Visa Card account with them. The whole process only took 5 or so minutes and his income was given verbally and they were happy with that. A high limit card was approved on the spot.

As others have written, it seems if you pass muster with the credit bureaus, rest is generally accepted at face value.

As I understand it, any receipt of wages, pension pay, Socials Security, or structured retirement fund disbursement is generally acceptable as income.

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GerryL
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Re: Retired applying for credit cards

Post by GerryL » Thu Oct 18, 2018 11:25 pm

mptfan wrote:
Thu Oct 18, 2018 8:25 pm
MandyT wrote:
Thu Oct 18, 2018 8:08 pm
You asked for the source of my understanding, and I provided it. I already noted that my approach may be overly conservative.
Fair enough. My only point is that there are no rules when it comes to what forms of income can be considered when filling out a credit card application.

And I don't think it's a stretch to consider withdrawals of principal as retirement income. One of the most important principles of being a Boglehead (and being wise about investing in general) is to live below your means and save a certain percentage of your income while working so that you can use those savings, including withdrawals of principal, as a form of retirement income after retiring.
When I applied for my last card I was still living mostly off of cash savings and had not yet started getting SS. I'd paid no federal taxes the previous year. The app was filled out on a computer by someone behind a Costco counter. When we got to "What is your annual income?" I told her it was whatever I wanted it to be, not what was on my last tax return. She asked me what I wanted to put down. I said "$45k. No, let's make that $60k. Or $70k." (That last one is what my Vanguard investment plan assumes I will spend in a year before taxes.) I can't recall what we finally settled on, but as soon as I thawed my credit I had the card.

inbox788
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Re: Retired applying for credit cards

Post by inbox788 » Fri Oct 19, 2018 1:45 am

Da5id wrote:
Thu Oct 18, 2018 12:54 pm
Thanks for the feedback, much appreciated. When I find a card that seems useful I'll give it a whirl. Just was a little confused on the whole "income" thing.
It's more like "proof of income" or "evidence of income". Anyone try bank deposits, brokerage statements or other investment based income rather than usual monthly paychecks/pension/SS checks or the burdensome and invasive tax return? I wouldn't do that for a credit card or car loan, but I did once provide tax return for a mortgage. I would guess dividends are easier to argue than unrealized gains. And if you pull $20k from your Roth account with a cost basis of $10k and $10k realized gains, is that $10k income or $20k income if you spend it all? Anyway, what the IRS want's to call income and what the credit card company (and other lenders) consider as income can be quite different and used for different purposes.

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Lancelot
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Re: Retired applying for credit cards

Post by Lancelot » Fri Oct 19, 2018 2:38 am

I've been retired since 2004 and have churned many cc for airline miles. I enter a modest amount for income and remember to use the same or slightly higher number for subsequent applications. I have never been denied a new air line co branded card; I was denied for an Amazon card. The only reason that I applied for the Amazon card was a cash rebate for the purchase I was making, not nearly as attractive as air line sign up bonuses :mrgreen:

midareff nailed it- it's all about the FICO score
No Where for Very Long...

MikeG62
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Re: Retired applying for credit cards

Post by MikeG62 » Fri Oct 19, 2018 7:04 am

mptfan wrote:
Thu Oct 18, 2018 7:21 pm
MandyT wrote:
Thu Oct 18, 2018 7:10 pm
mptfan wrote:
Thu Oct 18, 2018 1:14 pm
MandyT wrote:
Wed Oct 17, 2018 2:03 pm
My understanding of the rules is that I can count my smallish pension and interest/dividends in my taxable accounts, but not withdrawals from principal in taxable (though I think all withdrawals from retirement accounts would count).
What is the source of that understanding?
None of these list drawdown of savings or taxable investments.
Actually, they do. The list under the American Express heading includes "retirement income," and the list under the Chase Sapphire Preferred includes "Investments," and those things can include principal withdrawals from taxable accounts. Certainly those things are not excluded.
Not trying to pile on, but just wanting to bring up the point that "retirement income" is a broad and vague term. Is it limited only to realized gains? What about unrealized appreciation in year? For example, if your portfolio were up $200K last year and you sold nothing, would you include none of it? What if you sold half your portfolio, triggering realized gains of $100K? Would that be OK? Using a conservative interpretation, your "income" could be dependent simply based upon what your choose to sell and not what the gains (appreciation) actually were (and I fully realize that gains could evaporate in the future in a down market).

What about RMD's from your IRA (for those taking them). Is that retirement income? The IRS would say so. Yet it is also portfolio withdrawals.

For me counting what I am spending in retirement feels very conservative since in just about any up market, the value of my accounts when combined with dividends and interest is likely to be far greater than what I am withdrawing in the year (in fact, last year it was nearly four time what I withdrew). And if I took a multi-year average (to smooth out the good and bad years) again withdrawals would likely be less than dividends, interest and portfolio appreciation (by a fair margin).
Real Knowledge Comes Only From Experience

mptfan
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Re: Retired applying for credit cards

Post by mptfan » Fri Oct 19, 2018 8:35 am

MandyT wrote:
Thu Oct 18, 2018 7:10 pm
mptfan wrote:
Thu Oct 18, 2018 1:14 pm
MandyT wrote:
Wed Oct 17, 2018 2:03 pm
My understanding of the rules is that I can count my smallish pension and interest/dividends in my taxable accounts, but not withdrawals from principal in taxable (though I think all withdrawals from retirement accounts would count).
What is the source of that understanding?
I've tried to go to the "horse's mouth" by finding the applicable parts of the CARD Act of 2009 as amended by the CFPB in 2013, but there's a lot of gobbledygook to sift through.
I think the reason you can't find it is because it's not there...the CARD Act does not specifically identify what types of income credit card issuers are allowed to consider when reviewing credit card applications, the issuers are allowed to make that decision themselves.

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