How Your Income Affects Credit Card Applications

When you apply for a new credit card, you will reach a part where the credit card issuer will question you about your income.

This section may raise some concerns for customers, particularly those who do not apply for credit cards on a regular basis. You may be wondering what precisely counts as income and if yours is sufficient to be authorized.

Because your income plays a role in the credit card application process, it’s crucial to understand why it matters and how it affects your chances of acceptance.

Why do credit card firms inquire about your earnings?

Credit card firms request your income to assess whether to accept your application and, if so, how much credit you will be granted. For example, a card issuer may opt to accept you for a card with a credit limit of $1,000, $5,000, or more based on your income.

The Credit CARD Act of 2009 compels credit card providers to inquire about applicants’ income. It also states that they must only approve an application if they are certain that the applicant will be able to make their monthly payments. It does not, however, specify the amount of credit that can be extended.

Although your income has the greatest influence on your credit limit, it may also decide whether you are approved for a card. A minimum credit limit is necessary for some types of cards. That minimum is frequently established by the card’s payment network, such as Visa or Mastercard. It’s easier to demonstrate using an example.

Visa offers a variety of card tiers. Three of the most prevalent have their own set of credit limits:

Assume you’re applying for a Visa

  • Visa® Basic: No minimum
  • Visa® Signature: $5,000
  • Visa® Infinite: $10,000

® Signature card. The credit card company will only give you $2,000 in credit. Because it cannot offer a Visa® Signature card with a credit limit of less than $5,000, it must decline your application.

Credit card providers’ methods for determining your credit limit

Your income is an important component in setting your credit limit, but it is not the sole consideration. The credit card company should also think about:

  • You must make any monthly debt payments.
  • Your mortgage or rent
  • Your credit rating
  • Your credit limit on other credit cards

Each credit card issuer has its own algorithm for determining your credit limit based on this information. As a result, there is no way to estimate the credit limit you will receive from a card provider. However, there exist high-limit credit cards with larger limitations than normal cards.

In our research on credit limits, we discovered that card issuers want to maintain your overall credit limits of them between 25% and 100% of your yearly income. Some will begin with a smaller credit limit, but if you regularly pay on time, you can ask them to boost your credit limit later.

What is considered income on a credit card application?

There are varying income criteria depending on whether you are at least 21 years old. If you are, you can include any income that you have a “reasonable expectation of accessing.” This might include:

  • Earnings from your employment
  • Earnings from freelance labor or other sorts of independent work
  • The earnings of your husband or partner
  • Social Security benefits
  • Distributions from retirement funds
  • Distributions from trust funds
  • Grants and scholarships

For people under the age of 21, you can only mention personal income, allowances, scholarships, and grants.

Will your income be verified by a credit card company?

Although a credit card provider may request income verification, this nearly never occurs. Instead, they’ll accept your word for it and base their decision on your reported revenue.

Let’s start with the elephant in the room: What happens if you overstate your income because there is no income verification?

To be honest, you’re unlikely to get in trouble simply for lying about your salary. However, this is considered loan application fraud, and it may come back to haunt you if you are unable to repay what you charged.

If your claimed income on your credit card application was significantly greater than your actual income, a judge may rule that you cannot discharge credit card debt in bankruptcy. Offenders have even faced significant fines and/or jail in some situations. The maximum penalty for the offense is a $1 million fine and 30 years in jail.

A required component of any credit card application

When applying for a credit card, you must give proof of your income, but you need not be concerned. The fact is that the credit card firm just wants to ensure that you have the appropriate credit limit. You don’t have to be a high earner to receive a card; most cards are open to people of all income levels.


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