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When applying for a credit card, you must provide information about your income.
It is important to make sure this information is accurate and complete, as it will affect the credit card company’s decision on whether they will approve your application.
Before you apply, it’s helpful to know how your income affects your chances of being approved, what income you must report, what you must omit, and what the consequences are for reporting your income incorrectly.
Read on to make sure you provide the most accurate information when applying for a credit card.
How does income affect your chances of getting approved?
Card issuers have a duty under the Cards Act to make sure you are able to pay what you owe before providing you with an account. They use your income as part of their decision to approve or reject your application. Typically, the card issuer also checks your debt-to-income ratio, which measures your income against your debt obligations, and assesses whether you can make your minimum monthly payments.
Some issuers have their own specific minimum income and debt-to-income ratio limits, while others have a minimum credit limit. For example, Capital One requires income of at least $425 per month over your mortgage or rent to qualify for the card, but there is no minimum credit limit for the issuer. Wells Fargo, on the other hand, has a $1,000 minimum credit limit on its credit cards and does not require income.
Some credit card issuers may have more relaxed income requirements for students. For example, students may need to earn as little as $100 a month to get a credit card approved.
What income should be reported on a credit card application?
There are many different items that count as gross income, which must be included on your credit card application. It includes:
- Wages and wages
- income from self-employment
- Bonus payment
- Tips and commissions
- Retirement benefits, including pension, workers’ compensation and veterans’ benefits
- Government assistance, including assistance for families with dependent children, food stamps, Supplemental Social Income, temporary assistance for families in need, and Social Security benefits.
- Income from investments, annuities and retirement benefits
- Payments from others (such as alimony or alimony) that can be verified
If you are 21 or older, you may also include income from others, such as a spouse or parent, to whom you have reasonable access to pay your bills. This includes their income from wages and salaries, bonuses, tips, commissions, interest and dividends, and government assistance.
What income should not be reported on a credit card application?
Some sources of income may not be considered when applying for a credit card. These include:
- unemployment benefits
- Non-cash assistance, such as vouchers or subsidies for utilities and childcare
- Lottery winnings and gifts
- Some types of financial assistance
- Loans and borrowed money
In addition, there are types of income that do not need to be included when a lender assesses an applicant’s ability to repay a credit card. This includes child support, child support, and separate maintenance income that the applicant does not need to use to pay their bills.
In other words, you can list child support as income on your card application if you want, but it’s not required. If you do not want to rely on child support as a source of income to pay your monthly credit card bill, you do not need to report it.
What happens if you misreport income on a credit card application?
If the card issuer suspects that you are not reporting your income, they may request a financial review. These checks usually happen when something out of the ordinary is discovered in your spending patterns.
If a financial audit reveals that your income is materially different from what you claim, your credit card issuer may take action such as reducing your credit line, denying you future credit, or closing your accounts.
The consequences can be much more serious if you forge an application. According to the Federal Trade Commission, in the worst case, this type of fraud can result in a $1 million fine and/or 30 years in prison.
bottom line
When you apply for a credit card, it’s important to include all of your sources of income that can be verified. Do not list any sources of income you may have that are not normally included in card applications and avoid misrepresenting your income.
By reporting exactly how much you earn, you will be able to get the best deal from your potential card issuer.
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