What Does Annual Income Mean When Applying for a Credit Card? - When applying for a credit card, you need to let go many important personal details with the application form. One of the most important things which you have to submit is your annual income. However, the concept of annual income is complex. Thus, many people do mistakes when submitting their annual income information to the bank.
If you are filling credit card application for the first time, then you won’t know about what to fill in annual income column. Many students who are applying for a new credit card ends up lying in their credit card application. Because of this, their application gets rejected. Hence, it is very important to know about what to fill in annual income column. In this article, we will tell you about the Annual Income.
A lot of credit card issuers used to do fraud with their customers. Thus, in 2009, the Credit CARD Act of 2009 came about to protect the consumer’s rights. Because of the Credit CARD act of 2009, you need to submit your annual income to the credit card provider. They have set minimum income requirements for a credit card. But, this act set no particular income. The credit card issuer had to check if the applicant can meet their minimum monthly bills. This process was to ensure that every credit card holder is paying bills on time. Credit card companies can ask for your net income. However, most credit card issuers will ask about your annual income only.
Many people don’t know the actual meaning of Annual Net Income. It is a very confusing term. Thus, first, understand the meaning of Annual Net Income. Annual Net Income is the amount of money left after cutting all the taxes from your net income.
he meaning of “annual” is “yearly”. On your credit card application, report your yearly income. If you are working for a company, then it is easy for you. All you have to do is report the amount of money you earn every year. Just multiply your monthly earnings by 12. For example, if you are making $10,000 per month, then you are making around $120,000 per year. If you are a freelancer or working for hourly wages, then this process can be a burden for you. First, you must have a fixed hourly rate. After that, you need to multiply that amount by 52 because there are 52 weeks in a year. For example, if you earn $10.00 per hour and work for about 40 hours per week, then you are making around $400 per week. 40 multiplied by 52 is $208,000 per year. Thus, your annual income will be $208,000 per year.
Net is the amount of money you take home after all the tax deductions. You need to pay a lot of taxes like state and federal taxes on your annual income. Also, you need to pay a lot of local taxes which may come from your city, county, school. There are many other deductions like Social Security and Medicare. Many people have health insurances. Thus, their insurance company will also deduct money. Because of all these taxes, your net income will decrease by a great amount.
The most important thing in your credit card application is your credit score. If your credit score is bad, then your application will get rejected. After the credit score, Income is the second most important thing in your application. Your income will also determine your credit card limit. Income is not equal to the salary you receive. It can include other sources also. For example, if you are running a small online business then you can include that business profits in income also. Make sure that your income is as high as possible. This will help you in getting a credit card with a high credit limit.
Annual gross income is the amount of money you earn every year. But, your income will surely decrease after all the deductions. Thus, credit card providers usually ask about your net income. Net income is the amount of money left after all the deductions. Hence, they will get to know about your monthly spending capacity. They will use your net income to set your credit limit.
You can earn from many sources. Thus, the definition of income varies by age. If you are 21 years old, then your income can be:
• Retirement Fund Distributions
• Personal Income
• Trust Fund money
• Grants and Scholarships
• Gifts and allowances
• Social Security Funds
• Income from a parent or partner
If your age is between 18-20, then your source of income can be:
• Grants and scholarships from school or college
• Personal Income
• Allowances from parents with which documents can verify
Some credit card issuers will allow you to include variable incomes also like military allowances. Such income can start or stop.
Income from investments in property or stock market is also variable. If you are investing in the stock market, then your portfolio will change every day. If you are into rental property business, then your income will vary every month. Thus, it becomes very difficult to calculate your net income. Royalty income in gas and oil is also variable. Still, some credit card issuers would include allow to include them. People who work as freelancers have very unstable incomes. Their income will vary every still. But still banks will approve freelance income.
You can also share the income report of your partner or spouse. Thus, even stay-at-home parents can get a new credit card.
Never lie about your annual income on your application. That is the credit card fraud and can land you in jail for 30 years. Also, pay around $1 million to the issuer in fines.