Credit card options for retirees

[SYD]

About a week ago I had this dream I won powerball and in the dream I went out and applied for all the high points offers on CCs. Then I woke up and said to myself what an idiot. If I won powerball we would be just buying F revenue fares and not bothering about the points.

Ironically, they may not have automatically approved a CC or three even if you had won…!

 

[burmans]

Just got a Velocity Flyer card, second time this year. And yes I pay in full every month. So that’s 4 CC approvals in last 15 months and I’m 5 years retired.

So I still obviously believe people could do better than the gross generalisations apparent in this forum.

 

[mel-world]

Just got a Velocity Flyer card, second time this year. And yes I pay in full every month. So that’s 4 CC approvals in last 15 months and I’m 5 years retired.

So I still obviously believe people could do better than the gross generalisations apparent in this forum.

Ok. So what do you submit when they want evidence of all sources of income and they will not accept SMSF pension payments as income? Or as an asset for that matter.

 

[burmans]

Ok. So what do you submit when they want evidence of all sources of income and they will not accept SMSF pension payments as income? Or as an asset for that matter.

Well first given Responsible Lending laws require only income to be taken into account assets are irrelevant, government would be the people to complain to about that.

As for SMSF income I think you may have hit on one of the problems. My pension is from Australian Super and yes I need to point this out and provide either bank statements or a letter from the pension provider.

Not sure who you are talking about when you mention ‘they’, banks are not all the same and have different requirements about establishing income and whether they accept (and what they accept as proof). SMSF might be a problem as in theory you could change at any time if you are also the trustee, so maybe a letter from a 3rd party that pension is calculated as a statutory percentage you are unable to change.

 

[BCons]

Well first given Responsible Lending laws require only income to be taken into account assets are irrelevant, government would be the people to complain to about that.

As for SMSF income I think you may have hit on one of the problems. My pension is from Australian Super and yes I need to point this out and provide either bank statements or a letter from the pension provider.

Not sure who you are talking about when you mention ‘they’, banks are not all the same and have different requirements about establishing income and whether they accept (and what they accept as proof). SMSF might be a problem as in theory you could change at any time if you are also the trustee, so maybe a letter from a 3rd party that pension is calculated as a statutory percentage you are unable to change.

Well let’s take NAB for example. They weren’t happy (didn’t ‘conform to their standards’ given as reason for declining my application) with someone running their own SMSF (plentiful details supplied incl prev year’s tax rtn and acct balances), with no debt, who was well retired and thus reqd to be on a pension of at least 5% of SF acct Balance.

They nvr had a clear answer to my question whether someone with tax free income of $80k (either as a min drawdown or representing a modest 5% return on SF balance of $1.6 mio) shud be able to service a $25k limit CC.

NAB viewed my current ANZ and Amex cards as ‘liability’ and all that tells me they didn’t want my business because I cud readily service it monthly.

 

[mel-world]

I think that's the problem for some of us. We have accumulated our funds in a SMSF and have little outside the Fund to generate sufficient income other than regular withdrawals. Due to our age and spending habits, we may have been just too disciplined so do not represent a worthwhile customer for a card, especially one which has to pay the airline for the 60,000 points it offers new clients.

 

[VPS]

Just got a Velocity Flyer card, second time this year. And yes I pay in full every month. So that’s 4 CC approvals in last 15 months and I’m 5 years retired.

So I still obviously believe people could do better than the gross generalisations apparent in this forum.

Well I guess it depends on your super fund income. Mine is a lot less than many are quoting on here

 

[Gremlin]

NAB viewed my current ANZ and Amex cards as ‘liability’

?? How do you expect NAB to view them?

 

[BCons]

?? How do you expect NAB to view them?

What, paid in full monthly? As evidence of good credit to begin with..

 

[Gremlin]

What, paid in full monthly? As evidence of good credit to begin with..

You do understand that a credit card allows you to accrue a perpetual unsecured debt up to the limit of your cards, right? What other debts of yours do you not consider to be 'liabilities'?

 

[andye]

@burmans comment on corporate/industry funds being more favourably looked on than SMSFs is intriguing.
Maybe some with big balances might win by rolling a proportion out of their smsf?

 

[RooFlyer]

?? How do you expect NAB to view them?

You do understand that a credit card allows you to accrue a perpetual unsecured debt up to the limit of your cards, right? What other debts of yours do you not consider to be 'liabilities'?

I would hope ... but not necessarily expect for NAB ... that the credit assessor would view the applicant's assets and liabilities in their entirety. There's an old saying that its not the debt, its the serviceability that's important.

Do they accrue significant monthly debt on their credit card?
Yes.
Do they pay it off monthly?
Yes.
OK, that's a positive; next item ...

It really depends on the particular bank's assessment.

I recounted my recent, good experience with HSBC here:
. Card Offers - HSBC Star Alliance Credit Card: Fast-Track to Star Alliance Gold Status

All I had to tell them was that I has 2 CCs, total limit of $20K and the current balance (I'd just paid them off ). Nothing else (I guess they might look at stuff in the background?).

HSBC were able to handle my ad-hoc withdrawals from my SMSF, being > than the annual income requirement, with my accountant showing that the balance of the SMSF remained more-or-less unchanged. I was able to speak to them a couple of times to make sure that they type of docs I was submitting would be acceptable.

HSBC very much the friend of the retiree.

 

[burmans]

@burmans comment on corporate/industry funds being more favourably looked on than SMSFs is intriguing.
Maybe some with big balances might win by rolling a proportion out of their smsf?

That’s what I suspect. Personally I’m happy not having to spend a lot of time managing my investments and Australian Super fees are low compared to retail funds.

But this does appear to be an added benefit.

 

[burmans]

What, paid in full monthly? As evidence of good credit to begin with..

As previously noted they don’t look at assets and liabilities, they look at income and expenses. Even if you pay it off it’s still an expense.

Hence reducing your other loans or at least limits is always a good idea.

 

[Gremlin]

I would hope ... but not necessarily expect for NAB ... that the credit assessor would view the applicant's assets and liabilities in their entirety. There's an old saying that its not the debt, its the serviceability that's important.

Do they accrue significant monthly debt on their credit card?
Yes.
Do they pay it off monthly?
Yes.
OK, that's a positive; next item ...

I admire your optimism.

 

[Snowant]

The Bankwest card I recently got... they said I qualified for a $25k credit limit, but I thought it would be strategic to apply for a $15k limit, which I got.

On the application, I listed my other card, the old QF platinum, which had a $10k limit, and ticked that yes, I was planning on getting rid of that once I had a new card.

So. Bankwest sent my new card, fired it up, all good.

And then a month later, I got a letter from them stating that I needed to cancel my QF card, as I'd stated in my application.

I thought that was interesting because with both cards, I was still only at $25k potential credit debt.

But I paid off the QF one and got rid of it. I want to churn back to that in time anyway, as the sign on bonus points are good.

 

[RooFlyer]

I admire your optimism.

you don’t think a punter being able to pay their card off every month would be seen as a positive by the prospective new credit card issuer?

as opposed to the punter accumulating more and more debt on their other cards?

 

[Gremlin]

you don’t think a punter being able to pay their card off every month would be seen as a positive by the prospective new credit card issuer?

as opposed to the punter accumulating more and more debt on their other cards?

The issuer doesn't get to know whether the card is paid off in full each and every month. They don't collect full histories. They only get to know credit applications, defaults, limits and total outstanding balances. If they are carrying a limit and/or balance, then the associated expense or, perhaps more importantly, the potential expense, counts against the applicant.

 

[RooFlyer]

The issuer doesn't get to know whether the card is paid off in full each and every month. They don't collect full histories. They only get to know credit applications, defaults, limits and total outstanding balances. If they are carrying a limit and/or balance, then the associated expense or, perhaps more importantly, the potential expense, counts against the applicant.

Sure, but they can ask or it can be volunteered - which I was ready to do, and demonstrate if needs be because of my particular circumstances in application. IITC there also was stuff on my application which I had to put in, but which wasn't check-able by the issuer. There was also one enormous hole that they didn't ask for.

But to go back to the initial thing - that the credit assessor would view the applicant's assets and liabilities in their entirety. And the ability of an applicant to service their existing debt, and any additional being applied for I would have thought would be a useful thing to be considered, whether or not in the mandatory govt code or simply by request to the applicant "this is optional but may assist your application if answered".

 

[burmans]

My last application did not even ask for assets.

And that's probably because of ASIC guidance on the matter, see point 202 in this RG209

https://download.asic.gov.au/media/5403117/rg209-published-9-december-2019.pdf