Credit Card in Retirement

Qyburn

We're considering retirement before state pension age.  Currently my plan is to leave personal pensions untouched in the first instance, that's to keep my options open if I end up working part time or something so would still be able to contribute.  So effectively for the first couple of years we'll have no official income but will be living off savings rather than a regular monthly income figures.

Is this going to have an effect on credit cards, and is so is there anything I can do about it? I'm thinking both about the effect on the cards we have at the moment, and on the ability to change to a new account if these no longer suit.

We have American Express since 2016, the one that pays higher cashback with £25 annual fee, and that's used for the majority of purchases.  Also an Aqua Mastercard since 2018 for use in where they don't accept American Express.  Both have been paid in full each month by DD.

Thanks.

blue.peter

Any cards that you already hold at the date of actual retirement are unlikely to be affected. I did more or less the same as you're thinking of doing: I retired in 2015 (at 56), and had no income for about 15 months, until I drew my private pensions. (During that period, I lived on my redundancy payment). I'm not aware of it having had any effect on the credit cards that I already held. I just continued to use them in the same way as I did before ceasing work. Obviously, I continued to pay them off as normal as well.

I suspect that you might well have problems if you apply for any cards whilst you have no income. After all, you're likely to be asked what your income is during the application process, and £0 could well raise a red flag - it'd raise a question about your ability to repay. Remember, you'll probably be dealing with a computer agorithm, not a real person to whom you could explain that you'll be living on savings.

If you think that you might want another credit card before you draw your pension, I'd be inclined to apply for it before retirement. Well, that's what I'd do if I was in that position again. It might be worth thinking about what the credit limit is on your Aqua card, and whether it's sufficient. If it was me, I might be thinking about whether a Visa card might be a useful addition to my wallet.

Incidentally, I've had no difficulty in obtaining new credit cards since I started drawing my pension. I've applied for several over the last few years, and haven't been refused by any issuers. Of course, the fact that my pension is more than sufficient for my needs has probably helped.

cymruchris

Your existing cards will unlikely change, assuming you don't run out of money and start struggling with repayments.

Any new card application will ask for income. So if there isn't any, the chances of getting one are fairly close to zero.

If you want to be extra extra safe - apply for a third card now from another banking group while you still have your income - and then when retirement kicks in, it'll plod along like your existing two cards.

Qyburn

OK cheers. I'm not sure where that will leave us even when taking a pension as this will be a flexible drawdown arrangement, not an actual fixed monthly figure. I haven't really gone into the details of how I'll do that in terms of payments to what account and at what intervals. 

floppydisk1

As long as you fill the forms and get the card ( providing you want  one or couple of more ) before retirement - it does not matter as you have regular income and you can prove it. Once retired you can pay anything from minimum payment  to anything in between up to ( preferably )  a full  balance payment on every card every month and everything stays the same, no card will be affected. so if you  won't have enough savings or pension left over to pay every month you will be hit by the interest , then pay off in month or 2, it's  not  a problem ( apart from paying interest on any affected card ). Problem can arise when  you run  high balance and then pay only minimum payment every month ( where you will be marked as  in persistent debt ) , then card provider can ask for increased payments, start cutting limit every month up to your cleared amount, ask for a proof of income and once cleared, card can be cancelled.

lr1277

Don't assume your current cards will continue. You are probably ok with Amex and possibly the Aqua card, but don't count on it.

I have the John Lewis card which is being closed down so I am losing a credit facility. With my income as it is, I was refused the replacement New day card.

I suggest you get a Visa credit card, incase Amex is not accepted and Mastercard is down. You don't need a huge limit and as long as you put a few pounds through it every month, to keep it active. Obviously ensure you pay this new card off in full every month. If you find yourself using the new card(s) more, you can always ask for a higher limit (if required).

In my case I had other cards from previously so am ramping up their use. Unfortunately my debit and credit cards are all Visa. I need to find a way to get a Mastercard.

Edited to add: before I applied for the Newday card, I joined the MSE Credit club. It said I had a score of 999, but it did not ask about income.So that 'score' was irrelevant.

I thought about applying for the Aqua card, but note it is provided by New day. So didn't bother pursuing that avenue.

I also had a look around at other card providers. Lloyds group including Lloyds and Halifax allow you to put Independently wealthy as a job title. I did this on their eligibility checker and I put in an income figure I could defend, and it said I would be given a card with a limit that was acceptable to me. Though I have not followed through on that application. I think I will wait for my John Lewis card to show as closed on my credit report before applying.

WillPS

lr1277 said:

Don't assume your current cards will continue. You are probably ok with Amex and possibly the Aqua card, but don't count on it.

I have the John Lewis card which is being closed down so I am losing a credit facility. With my income as it is, I was refused the replacement New day card.

I suggest you get a Visa credit card, incase Amex is not accepted and Mastercard is down. You don't need a huge limit and as long as you put a few pounds through it every month, to keep it active. Obviously ensure you pay this new card off in full every month. If you find yourself using the new card(s) more, you can always ask for a higher limit (if required).

In my case I had other cards from previously so am ramping up their use. Unfortunately my debit and credit cards are all Visa. I need to find a way to get a Mastercard.

Edited to add: before I applied for the Newday card, I joined the MSE Credit club. It said I had a score of 999, but it did not ask about income.So that 'score' was irrelevant.

I thought about applying for the Aqua card, but note it is provided by New day. So didn't bother pursuing that avenue.

I also had a look around at other card providers. Lloyds group including Lloyds and Halifax allow you to put Independently wealthy as a job title. I did this on their eligibility checker and I put in an income figure I could defend, and it said I would be given a card with a limit that was acceptable to me. Though I have not followed through on that application. I think I will wait for my John Lewis card to show as closed on my credit report before applying.

You make a good point - it's unwise to consider any card as forever and co-brand cards are almost certain to end at some point. If you're lucky the card continues without branding, but Creation and HSBC prove that's not a certainty.

Non-co-brand cards from Barclaycard, Amex and other high street banks are far less likely to close completely so long as they continue to be used and managed sensibly. That doesn't stop them eroding the benefits or reducing credit limits down to below useful levels either tho.

lr1277

Further to WillPS’ point about co-branded cards ending by being sold on. This can happen but you may lose out on things other than rewards.
I had a Post Office card that had fee-free fx transactions. The loan book got sold by BoI to Jaja. The good points were that my limit stayed the same, I still have Fx free transactions and they did move my dd over so I didn’t miss any payments.
The bad points were the handover was not exactly smooth and the CS is not as easy to contact as PO CS.
Depends what is important to you.

Qyburn

Thanks again. Are you guys recommending that I add Visa specifically because Mastercard systems might give trouble at some point?  I am actually not that keen on a third card, we always had just one card until we started with American Express and at that point we added the Mastercard because it's needed in some places. At the moment the Amex pays 1.25% cashback, and Aqua pays 0.5% so I'm not sure when we'd ever use a third card. I assume an unused card would be shut down after a while by the provider.

If Visa is just for emergency, our Lloyds current account has a Visa debit card.

If the recommendation is to avoid branded cards, then I guess Barclaycard would be an option, that's Visa isn't it?  Or Lloyds do a credit card, but that's another Mastercard.

blue.peter

Qyburn said:

Are you guys recommending that I add Visa specifically because Mastercard systems might give trouble at some point?  I am actually not that keen on a third card

I wouldn't say that I was recommending it, but that I like to have one for myself. This is, in my case, simply for resilience. There's always a risk that someone's systems - whether the card issuer's (typically a bank), MasterCard's or Visa's will fall over - and a card won't be usable for a period. It's not usually a large risk, but it does exist. It has happened to me once or twice in the 40+ years that I've been using credit cards, and it's been good to have a backup available on those occasions.

There's also the risk that your present card(s) might get withdrawn. It doesn't sound as if that's a huge risk in your case but, again, it's not nil.

If you don't want a third card, that's fine. It's your choice.

Visa issuers include:

Barclaycard;

HSBC;

Nationwide (only available to members, I think);

Co-operative Bank.

I have a Visa card from MBNA (part of Lloyds Banking Group), but I'm not sure whether or not they still issue new ones.

blue.peter

Qyburn said:

If Visa is just for emergency, our Lloyds current account has a Visa debit card.

That might be sufficient, subject to the answers to two questions:

1. What is a day's typical credit card spending?
2. Would you have sufficient funds in the current account that backs the debit card to support that spending?

(I'm not expecting you to answer those questions here, unless you want to. They're only intended as points for you to think about.)