Obtaining a credit card opens many possibilities to make our credit life and immediate access to our funds and rewards programs. However, we must know what is a good annual income for a credit card to get a card with a good credit limit.
If we are students, unemployed, or have a low income, it may not be so easy to qualify for a credit card.
Why is income considered when applying for a credit card?
Different credit cards have different requirements for eligibility. They rarely publish the minimum annual income necessary to qualify for a credit card, but this does not mean that our income is not considered when making this evaluation.
However, gross and net income will be checked, determining which credit card we are eligible for. They will take into consideration some considerations such as credit score, work history, and housing status.
There is no single formula for positive credit card approval. For this reason, it is essential to consider these aspects to get a better alternative.
How much money is required for the application?
Each case will be evaluated differently, so getting credit card approval will not be the same in all cases. For this, it should be noted that a DTI of 43% is usually the highest, so reaching this number will not be good for your application.
The standard recommendation is to keep it around 36% or even lower to get approved for a credit card. This calculation for a student will be around 20%, but even then, having a low income will usually not let us be approved for a credit card.
What is an adequate annual income?
The approval or rejection will depend on our personal or household annual income. A good annual income for a credit card should be at least $39,000 for a single individual or $63,000 for a household.
If it falls below the median annual income, it won’t be easy to be approved for a credit card. On each application, we must fully disclose the amount of money we earn each year, and if we work hourly, we must multiply the rate by the hours we work in a week. If we are self-employed, we will use the income we were allocated for the year, both cash and accrued.
Why is income required?
Credit card companies will request our income to determine whether or not to approve the application. It is also stated that an application should only be approved if it is certain that the applicant can make their monthly payments.
Issuers usually consider disposable income, which will be left over after paying expenses such as rent or utility bills. Disposable income will help issuers determine the applicant’s credit card limit and whether the cardholder will be able to make payments on time. Any other sources of income will also need to be reported.
How should income be reported when applying for a credit card?
It will be imperative to report earnings on a credit card application so that credit card issuers can trust that we have obvious sources of income and review the application. Income for those over 21 years of age will consist of:
- Personal income
- Scholarships and grants
- Trust fund distributions
- Social Security income
- Allowances and gifts
- Distributions from retirement funds
- Income from a spouse or partner
All sources of income should be included on the application, indicating that these sources may be used to repay the debt. We will not have to include any income we do not have full access to or do not intend to tap into if necessary.
In the issuers’ cases, they will analyze our income through income modeling algorithms and financial reviews. If we cannot provide proof of our stated income, they may reduce our credit limits or even close our accounts.
How to obtain a student credit card?
Student credit cards are a great option for building credit with low income. Creditors will have different requirements to prove income depending on the applicant’s age.
The minimum income for students can be as low as $100, and still be eligible for a credit card. Never lie about your income on an application, especially since higher incomes allow for higher credit limits. Falsifying information on an application will be considered fraud.
Students can declare their independent income, which will generally allow us to have personal income, including regular allowances. In addition, some scholarships and grants must also be reported.
What happens if an incorrect amount of income is reported?
We could be prosecuted and convicted of fraud if we misstate in our credit card application. Every credit card application is a legal document, just like loan applications.
It may seem tempting to fudge the numbers to make it look like we earn more income to be approved for the card. However, this is not a good idea because we could face fines of up to $1 million or even imprisonment for up to 30 years.
For this reason, we should always be completely honest about our annual income. The minimum requirement will be $39,000 per year for an individual, but if we do not earn this amount of money, we should not lie because it could end badly for us as we will have a lot of money to spend and not enough income to cover it.