How To Report Income On Your Credit Card Application (2024)

When you apply for a credit card, you will be asked to provide your income. For some people, such as a single person who works a single salaried job, this is a simple question. However, for many people this becomes more complicated. Income can come in many forms: As salary, wages, tips, dividends or payments from others. Also, many people do not work outside the home and rely on a spouse or partner’s income. In that scenario, what should they report as income?

If answering the income question on a credit application is a source of concern, read on for some more context on why banks ask this question, what income can count and general guidelines to think about when applying for credit.

What Banks Count as Income

The definition of what banks can count as income for the purposes of credit card applications is found in in the Consumer Financial Protection Bureau’s (CFPB) official interpretation of 12 CFR Part 1026, specifically in its Comment for 1026.51 Ability To Pay.

The regulations spell out requirements for how banks must consider income and assets when issuing credit cards or credit card increases and give specific examples of what types of income can be considered when extending credit.

What this means for the banks is that they must consider a consumer’s ability to make minimum payments when extending credit and that the ability to make minimum payments can be based on current or reasonably expected income. The CFPB acknowledges that income happens in many forms and it takes this into account when giving banks guidance on what they can count.

Payments to You That Count

Most payments that you receive directly can count as income. This includes income from employment, including full-time, part-time, seasonal, temporary, military and self-employment. It also includes income from things like investments, annuities or retirement benefits. Here are some examples of payments that count as income:

• Salary and wages
• Bonus pay
• Tips
• Commissions
• Interest and dividends
• Retirement benefits
• Public assistance
• Alimony, child support and separate maintenance payments

Additionally, banks are able to consider both current and reasonably expected income. For example, if you have been recently laid off but expect to be employed again, you can report your previous income if you have a reasonable expectation that the number represents your future earnings.

Income From Alimony and Child Support

Many banks have language in credit card applications such as “Alimony, child support or separate maintenance income need not be revealed if you do not wish to have it considered as a basis for repaying this obligation.”

This language means you can choose to not include those payments. The intent is to allow credit card applicants to exclude income that may already be allocated to basic support of a person. If your reported income decreases because those types of payments are not included, you may qualify for a lower credit line.

Payments That Don’t Count

While most payments that you receive can be counted as income on your application, the exception is income that you do not have access to. As an example, if you have garnished wages, tax debts, child support or alimony, you could not include that income when applying.

Money You Can Access Counts

In addition to your direct income, the CFPB allows credit card issuers to consider third-party income that an applicant has access to. This rule is meant to allow people who do not work outside the home, particularly stay-at-home partners and spouses who rely on a working spouse or partner’s income, to access credit. If you have access to another person’s earnings, in some cases you can count that person’s salary as income for the purposes of a credit application.

For example, if you share a joint bank account with another person and that person’s salary is regularly deposited into that joint account, you can consider those deposits as part of your income. Additionally, if a state or local statute grants you an ownership interest in another person’s income, you can usually use that person’s income when reporting income on a credit card application.

In addition, if another person grants you periodic payments or regularly pays for your expenses, you can count those amounts as income on credit applications. As an example, if you have a roommate subletting from you who makes direct payments to your landlord against your rent obligation, you can consider those payments as income on your credit application.

Special Rules for People Under 21

The Consumer Financial Protection Bureau imposes special limits for banks issuing credit to people under the age of 21. According to the bureau’s rules, borrowers under 21 must have an independent ability to make the minimum required payments or have a cosigner who is 21 years or older and who agrees to become liable for the debt on the account.

This generally means that someone under 21 cannot count income from others that they may have access to when reporting income on a credit card application.

The Application Will Give You Guidance

It is important to note that the regulations covering which types of income can be considered when extending credit are regulations that apply to banks, not individual consumers.

When you are applying for credit, the bank will give you guidance on what income to report on the application. Here is an example from a Citibank credit card application:

Total Annual Income:

Examples: Salary, wages, interest, dividends, rental income, retirement benefits. If you are 21 years or older, you may include income from others that you can reasonably access to pay your bills

You do not have to include alimony, child support, or separate maintenance income if you do not want it to be considered as a basis for repaying this obligation.

As long as you are making a good faith effort to report income accurately according to the bank’s guidelines, you will be fine.

Consequences of Misreporting Income

It can be tempting to overreport your income. After all, a large income number might result in a larger credit line. However, this is a bad idea and can have serious consequences. Your credit card issuing bank is using your income information to estimate your ability to pay and extend you only the amount of credit that it believes you can pay back. Having the ability to spend way beyond their means can and does get many people into financial trouble.

Additionally, if a credit card issuer finds that there is something unusual about your spending patterns, they may request that you undergo a financial review. A financial review often involves submitting documentation, such as recent paystubs or a tax transcript so that a lender can verify your reported income. If you refuse to participate in a financial review or if your financial review reveals that your income was substantially different from what you reported, the credit card issuer may use that as a basis for reducing your credit lines, denying you future credit or closing your accounts.

Although rare, lying about your income can have consequences beyond closed accounts. This could include civil penalties and adverse action should you file bankruptcy and seek to get debts discharged. In the most extreme cases, lying about your income could land you in prison.

Bottom Line

When reporting your income on the credit card application the best guidance is to follow what is on the credit card application and remember these three rules:

• Be truthful. Remember that misreporting income can have consequences, from adverse action like decreasing credit limits to criminal penalties.
• Report income you have access to. Report your income from wages and payments. Report income from your spouse or partner if it is deposited into a joint account that you have access to.
• Don’t overthink it. Nobody is asking you to precinct exactly what line your adjusted gross income will be on next year’s tax return. All the credit card application is asking for is your best estimate of your current income or what you expect your income to be.

Making a good faith effort to accurately state your income on a credit card application will ensure that your bank is able to appropriately evaluate your application and that you will receive a credit line sized to your ability to pay.