What counts as Income in Eligibilty Calculator / Credit Card Application

wtsang01

I am retired early due to healthy finances. Hence I have 0 income from employment, and draw from savings. My savings are a fairly even mix of simple cash accounts, stocks, unit trusts, pension funds and equity on my home, so income from interest these days is virtually zero. Income from dividends is unpredictable. So my question is:

      * When I apply for a credit card, what do I say is my income?

I calculate I can draw with certainty £30k pa (i.e. above average earnings) from my savings for the next 30 years ( which seems to me to be more reliable income stream than for someone employed at the same salary.) However, when I fill in the eligibility calculator on this site, I say I'm retired, OK. The next box asks what is my income from employment! It won't take 0! (I know there is another box for other sources of income, but nevertheless I don't want to put in a made up income).

      * More importantly, when I get to the formal application stage, then is it generally accepted by the credit card companies that income may be calculated as [low-risk assets] / [years to live] ?

I want to apply for a new credit card because my current and only provider of 18 years has failed to provide an online service for at least 4 weeks now, which might be challenging if I want to go paperless. Why do I still want a credit card? For the purchase protection, and keep some activity going for my credit score. If there is another way to achieve these, I'd also be interested to know.

Thanks, Everyone!

harsh_but_fair

Your income is what your income is

you cannot count withdrawal from savings as that is a capital withdrawal and not income

as a rough rule of thumb and very rough it is what you would put as your income should you be filling out a tax return

For most people this would be income from employment (which I accept for you is zero), income from pensions and income from things such as dividends and Savings interest and possibly in come from for example Residential Lettings

wtsang01

harsh_but_fair said:

Your income is what your income is

you cannot count withdrawal from savings as that is a capital withdrawal and not income

as a rough rule of thumb and very rough it is what you would put as your income should you be filling out a tax return

For most people this would be income from employment (which I accept for you is zero), income from pensions and income from things such as dividends and Savings interest and possibly in come from for example Residential Lettings

That's one definition of income. My question was really this one: Is that the definition they actually use?

In other words, if a bank were to lend a max of <credit limit> to a borrower, would they feel just as safe lending to someone on a monthly salary of <monthly salary> guaranteed for the next <employee's dismissal notice period> or to someone who could draw the same amount every month from savings that are totally owned, not collateralised, liquid, and low risk for the next <remaining life expectancy> years?

If you can confirm that your reply is based on experience within the credit card industry, that would be most helpful, because I'm finding difficulty accessing call centre staff who can confidently answer my question. They usually acknowledge the conundrum, but can't refer me to someone who actually makes the decision.

Fighter1986

If you want a more accurate definition than what's already been provided you'll need to contact the individual credit card issuers and seek their opinion. It's upto them what they consider income, not us, and they all vary. 

But as a generic rule of thumb, income is funds received that you didn't already have - funds from external sources.

Interest, dividends, pensions, salary, wages, benefits, rent from rental properties minus expenses, and the like.

Capital you already have isn't an income. It's capital. You may find certain lenders more amicable with your situation than others but we won't know who I'm afraid. 

I'd imagine your credit history is exemplary, and if you are honest about your income using the above calculation it only plays one part of the credit scoring method. If your credit file demonstrates you've been clearing large card balances in full each month for a long time, this will factor into the limits you're assigned. 

You also have the option of writing to the card underwriting team if an application is declined or a credit limit is too small, enclosing proof of your assets, asking for a manual review, as is your right under GDPR. 

SnowTiger

wtsang01 said:

harsh_but_fair said:

Your income is what your income is

you cannot count withdrawal from savings as that is a capital withdrawal and not income

as a rough rule of thumb and very rough it is what you would put as your income should you be filling out a tax return

For most people this would be income from employment (which I accept for you is zero), income from pensions and income from things such as dividends and Savings interest and possibly in come from for example Residential Lettings

That's one definition of income. My question was really this one: Is that the definition they actually use?

In other words, if a bank were to lend a max of <credit limit> to a borrower, would they feel just as safe lending to someone on a monthly salary of <monthly salary> guaranteed for the next <employee's dismissal notice period> or to someone who could draw the same amount every month from savings that are totally owned, not collateralised, liquid, and low risk for the next <remaining life expectancy> years?

If you can confirm that your reply is based on experience within the credit card industry, that would be most helpful, because I'm finding difficulty accessing call centre staff who can confidently answer my question. They usually acknowledge the conundrum, but can't refer me to someone who actually makes the decision.

If the credit card company doubts your income they'll write to you asking for evidence.

You could send back bank statements showing £30,000 income paid in to your bank account(s) from external sources during the previous year or provide evidence of how you to come to the £30,000 figure.

I think counting depletion of capital and home equity as income is probably stretching things a bit.

A £30,000 annual income for someone who's retired isn't a huge amount.  I think in the real world a card provider would accept the figure.  You initial credit limit might not be high.

wtsang01

SnowTiger said:

I think counting depletion of capital and home equity as income is probably stretching things a bit.

Isn't that the idea of saving for retirement? Are you saying that a retired person living off savings and pension funds designed to last for 30 years is "probably stretching things a bit"? I agree I wouldn't rely on home equity, but capital includes very liquid assets, and by it's very nature is a more tangible asset future "income". Surely pensioners have credit cards even if they choose not to convert their funds into annuities? Thanks for all the replies. I asked because the bank help desks seem to be short staffed at the moment for obvious reasons. I thought maybe someone reading this would have an industry view on it.

wtsang01

Fighter1986 said:

...It's upto them what they consider income, not us, and they all vary. 

Who is us? Are you replying on behalf of all the readers?

SnowTiger

wtsang01 said:

SnowTiger said:

I think counting depletion of capital and home equity as income is probably stretching things a bit.

Isn't that the idea of saving for retirement? Are you saying that a retired person living off savings and pension funds designed to last for 30 years is "probably stretching things a bit"? I agree I wouldn't rely on home equity, but capital includes very liquid assets, and by it's very nature is a more tangible asset future "income". Surely pensioners have credit cards even if they choose not to convert their funds into annuities? Thanks for all the replies. I asked because the bank help desks seem to be short staffed at the moment for obvious reasons. I thought maybe someone reading this would have an industry view on it.

To me, income means money from external sources.  I don't consider money I've moved from one of my accounts to another as income.

I move £1,000 from my savings account to my current account, then move it back.  Is that an income of £1,000 (or £2,000)?

harsh_but_fair

it is an income of zero