Why Disclose 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. No particular income level was specified, but each individual merchant or credit card company had to verify that the applicant could meet the minimum monthly payment. Companies could ask for a pay stub or W-2 to verify annual gross and net incomes. Most credit card applications ask for annual net income.

Annual Net Income

When you put the words “annual net income” together, the number you put on your credit card application isn’t quite as straightforward as it sounds. Annual net income is the amount of money you make in a year after all deductions and taxes are subtracted. What do the parts of “annual net income” mean? Annual gross income is your income before anything is deducted. Credit card companies usually prefer to ask for net income, because that is what you have available with which to make your monthly payment. Some companies may ask for annual gross income.

What Qualifies As Income?

The definition of income varies by age. For anyone over 21 years of age, income can be:

Personal income Income from a spouse or partner Trust fund distributions Social Security distributions Retirement fund distributions Scholarships and grants Allowances and gifts

For anyone between ages 18 and 20, income can be:

Personal incomeAllowances that can be verified by tax returns or other documentsScholarships and grants

Some credit card companies allow you to include income that can be variable, such as military allowances. That income could stop and start. Income from investments in stock and rental property is also variable. Stock dividends may rise or fall, for example. With a rental property, you may have your property fully rented or not. Royalty income in oil and gas, for example, is very uncertain, but some banks allow it to be included. The same is true for royalty income in areas like music or book publishing. People who work as freelancers tend to have very uncertain incomes, but banks often approve them. Even stay-at-home parents can get a credit card if they report shared income from a working spouse or partner.