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Consider a person with no income for the first 6 months of this year (from January to June), who gets a job offer for $AAA per year and applies for a credit card in July:

The credit card application asks for annual income. Is this the amount expected this calendar year ($AAA / 2) or the nominal salary $AAA?

Kate Gregory
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    "annual income" = Starting today, in the next 12 months how much do you expect to earn? – MonkeyZeus Jun 07 '21 at 12:44
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    If you were in a scenario in conversation where someone said "Well as someone making $AAA a year, you can finally afford that foo you always wanted!" You wouldn't correct them by saying "Actually, $AAA / 2 this year..." – corsiKa Jun 07 '21 at 22:48
  • You need to ask each of your credit providers what they specifically mean. Most people's annual income might well be no more than the salary from their main employment… and do you not know people who have investments beyond that, including stocks, shares and rental properties, let alone second jobs? – Robbie Goodwin Jun 12 '21 at 23:07

3 Answers3

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You should enter your current salary as an annual amount. In your example, that would be $AAA.

The credit card company does not care about your past income; they only care about your current and future income. They ask you to express it an an annual amount to avoid confusion, but it really has nothing to do with the past or the current calendar year. They just want to know what you are currently bringing in.

Ben Miller
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Ben Miller's answer is certainly accurate, but there's another angle that you should be made aware of.

Under the 2013 amendment (PDF) of the federal regulations regarding the Credit Card Act of 2009, persons 21 and older may report their total household income as their own personal annual income on a credit card application, provided that they have a reasonable expectation of access to household funds.

In other words, you may combine the annual income of yourself and your spouse / partner / significant other with whom you share a household if you typically share household expenses and expect that the other person would help pay your debts if you were unable to pay on your own. In fact, you may both use the combined total on all of your credit card apps. You don't need to disclose the fact that you are reporting total household income -- this is your right under federal regulations. Note that a credit card application may explicitly tell you not to include income of another member of your household as income -- this is allowed by regulation -- and in that case you would only list your own income . . . or pick a different credit card to do business with!

The rationale behind this amendment is that it affords equal credit treatment to both parties when one works outside the home and one is primarily a stay-at-home parent.

MTA
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    Does that "household income" include your parents' income, if you're one of those "failure to launch" types still living in their basement? – jamesqf Jun 07 '21 at 17:30
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    @jamesqf - I don't know the legal answer (I feel like it should be "no"), but if your parents would pay your bill if you can't, then I'd say, conceptually, yes. – TTT Jun 07 '21 at 17:42
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    Page 24 of that PDF appears to contradict your answer: "In other words, a card issuer may consider income and assets to which an applicant has a reasonable expectation of access, but is not required to do so. A card issuer has the option of limiting its consideration of an applicant’s income and assets to his or her independent income and assets." So if the issuer specifically asks for your individual income, it appears that you're supposed to provide your individual income. – Kevin Jun 07 '21 at 21:36
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    @Kevin Good catch! I've added language to that effect to my third paragraph. Thanks for helping make this a better answer. – MTA Jun 07 '21 at 22:18
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    @jamesqf The regulation doesn't specifically consider "failure to launch" types, but lists a number of factors that support a reasonable expectation of a household member covering debts, such as shared bank accounts or regular transfers of funds from the other household member's bank account to the applicant's account. – MTA Jun 07 '21 at 22:25
  • @TTT: I'm not on either side of that situation (for which I'm thankful), but it's just one of those "how come they think one size fits all?" questions I wonder about. Like if most of your income comes from investments: do you put how much your investments appreciated (or depreciated), the small fraction you actually took out to spend (which would make me look poor), or what? – jamesqf Jun 08 '21 at 17:17
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    @jamesqf The overarching principle is that the question is designed to determine if you have money available to you that you could use to pay off debts you incur. In that sense, one size really does fit all. If you have predictable asset appreciation, and you could/would liquidate that appreciation to pay debts, then it should be counted. If you're a 30 something living at home and mom does/would pay your CC bills, then mom's income should be listed. Just apply that same principle to every theoretical situation. – GrandOpener Jun 08 '21 at 18:51
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    @jamesqf For a person making most of their income from investments, flipping houses or anything other than wages, the Adjusted Gross Income (AGI) from your last tax return is a perfectly reasonable number to give as your annual income. It's easily documented and no credit issuer could reasonably question its accuracy or veracity. – MTA Jun 08 '21 at 19:33
  • @MTA: But the AGI would be basically what I spend, which in most years is quite a bit less than investment appreciation. (Though of course there are those years, like 2008-09, where it's the other way around :-() So it's certainly not an accurate way to determine whether I could pay debts. – jamesqf Jun 09 '21 at 04:23
  • @jamesqf If AGI is basically what you spend per year, then it's the functional equivalent of wages for most working people. Credit card issuers generally don't care how much money you could raise by selling your assets. They want to see income. So for people with investment income and no income from wages, AGI is a reasonable substitute for credit app purposes because it's by definition your annual "income". – MTA Jun 09 '21 at 16:10
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Excellent answers here about spousal income and salary, and using your forward-looking income. I have one addition. If you have regular bonus income, stock income, or other generally expected compensation, which may or may not include 401k matches and things like (employer, 100% nothing-out-of-pocket) covered healthcare, those may be fair to include. It never hurts to have more available credit.

ryebread_g
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