Annual income for credit card approval. One of the most important information needed for your credit card approval is your annual income. The financial institution you are borrowing from the need to be sure that you have a means of livelihood and that you are capable of paying back your debts. Annual income is not as simple as it sounds, you need to learn more.annual income for credit card approval

Annual Income For Credit Card Approval; Why Show Your Income

In 2009, the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD) was passed to protect consumers from predatory credit card practices. One of the provisions of the CARD Act was to institute income requirements to get a credit card. This does not require a particular level of income. Each financial institution or lending firm is free to verify that the applicant can meet the minimum monthly payment. They can require for a pay stub or confirm both annual gross and net incomes. This is to ascertain the borrower’s ability to pay back.

Annual Income For Credit Card Approval; Annual Net Income

The term Annual Net Income means the amount of money you make in a year after all deductions and taxes are removed. Here, annual means; Yearly. It means the amount of salary you get every year. For instance, if you earn $3 per hour and you work for 3 hours daily for 30 days in a month.  It means $270 multiplied by 12 months. Net is the amount you take home after all deductions are taken out by your place of employment. Usual deductions are federal and state taxes.  There are also deductions for Medicare and Social Security.

Other Deductions

You may have deductions for savings plans including retirement savings like a 401(k). There may also be a deduction for health insurance Am sure that the amount you put on your card application is not always exactly this amount. Income is very pertinent for determining your credit limit. Income includes wages and salary as well as any other place you earn money from. It could be a private business, inheritance, grants and many more. You should make your income as high as you legally can on your credit card application. An amendment to the CARD Act of 2009 broadened the definition of income for credit card applicants.

Annual gross income is your income before any kind of deduction. Financial institutions always prefer to ask for net income since that is what you have available to pay your monthly payment.

What Makes your Income?

If you are 21 years and above, your  income can be:

  • Income from a spouse or partner
  • Social Security distributions
  • Retirement Fund Distributions
  • Scholarships and grants
  • Allowances and gifts from parents and relatives
  • Personal income
  • Trust fund distributions
  • Inheritance.

For anyone between 18-20, income can be:

  • Allowances that can be verified by tax returns or other documents
  • Scholarships and grants
  • Personal income

Income from investments in stock and rental property changes. The market goes up and down as well as the value of your portfolio. Royalty income in oil and gas can be unpredictable, however, some banks include it. The same is true for royalty income in areas like bookselling and publishing. Freelancers have very uncertain incomes, but banks often approve freelance income.

Interestingly, stay-at-home parents can get a credit card if they report shared income from a working spouse or partner.

In conclusion, do not over or underestimate your annual income. Lying about your annual income during credit card application has a very devastating result. It is called credit card fraud and can cost you $1 million in fines and 30 years in prison. Be wise.  If you do not know how to calculate it, ask for help.