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I was surprised after I retired when I could not get an increase in the credit limit on a credit card I'd held in good standing for many years. After I retired, the only income that qualified for a credit card or a credit limit was my social security income (so explained the card representative). In fact the representative told me that I was not qualified for current credit limit, and that they would be adjusting it downward to reflect my "lack" of employment.

I am now taking my RMD (required minimum distributions) and paying taxes on those distributions just as if I were being paid by an employer.

Do credit card companies recognize RMDs as income just as if they were being paid by an employer?

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I feel like this has nothing to do with income, and as such RMDs will not really help or harm you.

After a person passes, credit card companies are unlikely to collect any outstanding balance. Debts cannot be inherited, however, assets can be made to stand for debts. Many assets pass to heirs without the probate process and in some cases all of them pass this way. This leaves creditors with nothing and having to write off the balance.

Even if assets do pass through probate heirs may dispute the creditors. In that case credit card balances may not be high enough justify hiring a lawyer to fight for payment; or, if they do the judge may be unsympathetic and offer nothing or pennies on the dollar.

The bottom line is that they probably see you, or your demographic, as a poor credit risk and reduced their exposure by lowering your limit. While that is not what they told you, they probably have to carefully structure what they say to avoid any discrimination claims.

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  • let me be more specific: To circumvent exposure to a "over-limit" fee, a customer rep suggested I increase my credit limit from 9700 to 10700. (I had and currently have a credit rating of >800) When I said OK, and she began to process the increase, and asked me about my income (there were no questions about assets). She said that she would be unable to increase the CL, because the only "regular" income I had was social security, and that was insufficient to qualify for an increase to 10700. She went on to say that my CL was too high and that the Credit Card company would be lowering it. – BobE Sep 29 '17 at 21:09
  • so while I understand your references to "passing" etc. I'm just 72, and expect to be living for a long while as well as receiving RMDs in ever increasing amounts for the next 20 so years. BTW, I have never carried a monthly balance - don't intend to start- so the only maximun possible exposure the card company would have the previous month's balance (which come to think of it would be limited to the credit limit) – BobE Sep 29 '17 at 21:15
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    @BobE While I agree that it's probably income here, when you say 'the maximum exposure", you're wrong. The maximum exposure is your credit limit. There's nothing to say that you will continue to behave as you currently are, and on top of that - if you were to suddenly become ill, and have a lot of medical expenses, guess what? You might start carrying a balance, max out the cards, and then eventually they're going to end up with not much. This happens a lot. – Joe Sep 29 '17 at 22:16
  • @BobE: Do the process on-line. I've never had a problem, even though I guesstimate my income as including increases in my investment worth, only a small fraction of which is likely to be realized that year. – jamesqf Sep 29 '17 at 23:17
  • @Joe: I believe I said in my last line - max exposure would be limited to credit limit – BobE Sep 30 '17 at 3:32
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My understanding is that credit card companies are allowed to accept retirement income as part of the income that would qualify you for credit.

The Consumer Finance Protection Bureau issued a final rule amendment to Regulation Z (the regulations around Truth in Lending Act) in 2013 in response to some of the tightening of credit that resulted from the Credit CARD Act of 2009. The final rule allows for credit issuers to "consider income and assets to which such consumers have a reasonable expectation of access." (Page 1) On page 75, it outlines some examples:

Other sources of income include interest or dividends, retirement benefits, public assistance, alimony, child support, and separate maintenance payments.... Current or reasonably expected income also includes income that is being deposited regularly into an account on which the consumer is an accountholder (e.g., an individual deposit account or joint account). Assets include, for example, savings accounts and investments.

Fannie Mae explicitly mentions IRA distributions in its Documentation Requirements on mortgage applications. For them, they require that the income be "expected to continue for at least three years after the date of the mortgage application."

Lenders can reject or lower your credit limit for just about any reason that they want, but it seems appropriate for you to include your retirement distributions in your income for credit applications.

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The actual policy will vary based on the specific bank. But, if I were in your shoes I'd include RMDs in my stated income for credit card purposes.

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