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What Annual Income Is Required for a Credit Card? | Credit Cards

If you’re considering a new credit card, you might wonder, “What income do I need to qualify for a credit card, anyway?”

It’s an important question, since companies are legally required to verify that you have sufficient income to access a line of credit. However, the minimum income for a credit card isn’t a hard number and is based on several factors. Below, we’ll take a closer look at credit card income requirements and how to report your income correctly.

Why Is Income a Credit Card Consideration?

Different credit cards have different eligibility requirements. However, your income always plays a major role in getting approved. So what is the minimum income to get a credit card?

“Credit card issuers rarely publish a minimum annual income requirement for their credit cards, but that doesn’t mean they aren’t taking your income into account when evaluating your application,” says Jason Vissers, expert analyst and reviewer at Merchant Maverick, an information source on business financial services.

The Credit Card Accountability Responsibility and Disclosure Act of 2009, more commonly known as the CARD Act, includes several protections to keep consumers from falling prey to predatory practices. One of those provisions is income requirements to get a credit card.

Though the CARD Act doesn’t state any specific minimum income requirement, credit card companies do have to ensure applicants have enough income to support monthly payments before they can be approved. The creditor may ask for a pay stub or W-2 so it can verify both your gross and net income and determine whether you can afford to take on new debt.

Creditors may also look at other factors as part of the approval process, such as your credit score, job history and housing status. Keep in mind, though, there’s not always a simple formula for getting approved by a major credit card issuer, says Jeanne Kelly, credit expert, author, speaker and owner of credit coaching company The Kelly Group Credit Coaching Inc.

For example, you can have a good credit score but only have one loan or card to your name. “That might get you declined for not having enough credit yet,” Kelly says.

You could also have a high income but still not get approved for a credit card if you already carry a lot of debt.

How Much Income Do You Need for a Credit Card?

“Two people with the same income may be evaluated differently by a credit card issuer if one of the two applicants has more debt to repay,” Vissers says. “That’s because of something called your debt-to-income ratio, or DTI.”

Your DTI, which is expressed as a percentage, measures how much of your gross monthly income is allocated toward debt repayment. For example, say you earn $6,000 per month before taxes get taken out. You have a student loan payment of $800 per month, plus a car payment of $400 per month. That means your total monthly debt obligation is $1,200. Here’s how the DTI formula would work out:

Debt ($1,200) / Income ($6,000) = about 20% DTI

A DTI of 43% is usually the highest that lenders will allow in order to qualify for a mortgage, though there’s no specific cutoff for credit card approval. Even so, it’s a good idea to maintain as low a DTI as possible, with less than 36% being the standard recommendation. “The more debt obligations you have, the higher annual income you’ll need to qualify for a credit card,” Vissers says.

So you can see it’s not just your income that matters when applying for a credit card, but also how much of that income goes to debt repayment. Two people can earn the same income, but one might be approved for a card while the other is not based on their respective DTIs. Therefore, the minimum income for a credit card is however much you need to earn in order to keep your DTI at an ideal level.

How to Report Your Income on a Credit Card Application

When it comes to your credit card application, there are several types of income you can include in addition to the money from your regular 9-to-5. In fact, the Consumer Financial Protection Bureau amended CARD Act regulations in 2013 so that applicants 21 and older could include third-party income, such as a partner or spouse’s income, as long as they have “a reasonable expectation of access to it.” Included in that broad definition are:

  • Personal income.
  • Scholarships and grants.
  • Allowances and gifts.
  • Trust fund distributions.
  • Retirement fund distributions.
  • Social Security benefits.

Don’t forget, if you choose to include these various sources of income on your application, you’re saying that you are able to use this money to pay back your debt. Don’t include income that you don’t have full access to or don’t plan on tapping if necessary.

Credit Card Income Requirements for Students

Credit card applicants 18 to 20 are subject to slightly different income requirements. They’re not able to include most third-party income, such as that from a partner, and can only include personal income as well as scholarships and grants.

For instance, you can’t count loan disbursements, which is true regardless of your age. Money you receive by taking out a loan, such as a student loan or personal loan, is technically not income since it has to be paid back. Even if you use your loan money to pay for living expenses, in the eyes of creditors, it’s not considered income.

Also, in most cases, the wages of your parents are not allowed to be included as income. Unlike with spouses or partners, where it’s reasonably expected that you would have access to their income, it’s assumed that you wouldn’t have the same kind of access to income earned by your parents. The exception is if you receive an allowance or regular deposits from a parent into an individual or shared bank account.

So what if you don’t have an income as a student? You’ll need to apply with a co-signer who’s over 21. The co-signer is legally responsible for paying back your credit card balance if you don’t, so both credit scores will be impacted if you miss payments. Be sure your co-signer is comfortable with the risk if you decide to go this route.

What Happens If You Report the Wrong Income?

When it comes to reporting your income on a credit card application, it’s not required that you get it perfect. Don’t stress about getting it right down to the last dollar. It’s meant to be an estimate, even if that estimate is expected to be pretty accurate.

It might be tempting to fudge the numbers and make it look like you earn more income so you can get approved for the card, but that’s not a great idea. If you’re caught lying on an application, you could be charged with credit card fraud, which carries maximum penalties of $1 million in fines and/or 30 years in prison.

Most importantly, however, remember that income requirements are in place for your protection. “If it’s necessary for you to lie to qualify for a credit card, you’re likely to have trouble making your payments at your current income and debt levels,” Vissers says.

If you can’t get approved, consider setting your sights on a different card, as financial institutions all have their own credit approval process; just because you’re turned down for one card doesn’t mean you’ll be denied for all. Keep in mind, however, that every application you submit will result in a hard credit inquiry on your credit reports. One or two inquiries should have a negligible impact on your credit score, but several within a span of two years can cause your score to drop.

Alternatively, Kelly says, “You can always prequalify for a card.” This is when the creditor does a soft pull of your credit, which doesn’t affect your credit score, to see if you meet certain requirements for approval. It’s not a guarantee that you’ll be approved, and you’ll still have to submit a formal application, resulting in a hard credit inquiry, to get the card. But it’s a good way to gauge whether there are options available based on your credit and income.

You might also consider opening a secured card. “These cards require a security deposit that establishes the amount of your credit line, so the requirements are relatively relaxed,” Vissers says. You can eventually upgrade to a traditional credit card once your income is more substantial.

Reviewed on May 31, 2023: This article was previously published at an earlier date.

Sarah Goldberg
Sarah Goldberg

Sarah is a seasoned financial market expert with a decade of experience. She's known for her analytical skills, attention to detail, and ability to communicate complex financial concepts. She holds a Bachelor's degree in Finance, is a licensed financial advisor, and enjoys reading and traveling in her free time.

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