Annual net income — What should you include on credit card applications?

4 min read
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When you apply for an extra credit card, you’re required to share an array of personal information on your application. This will include details like your name, your address, your Social Security number and your current employment status. You’ll also be asked to list your income on your application, although the type of income card issuers ask for can vary depending on the card issuer.

What is annual net income?

Some credit card issuers will ask for your net income when you apply for a new credit card, but what does this mean? Generally speaking, your net income is the amount of money you bring home in your paycheck after taxes, health insurance premiums and retirement contributions are taken out.

Note that, sometimes, a credit card issuer will phrase the income question differently. If you apply for a Bank of America credit card, for example, they may ask for your “total annual income” instead.

Also, know that not all credit card issuers will ask for your annual net income. Some may explicitly ask for your gross income instead.

The difference between your net income and your gross income is simple. Where your annual net income is how much you bring home in your actual paychecks after deductions are taken out, your gross income is how much you earn before deductions and taxes are taken out.

If you apply for the Chase Freedom Unlimited®, for example, they’ll ask for your “total gross annual income.”

Your gross income may be easier to calculate since it could be the annual salary you agreed to when you accepted your job. If you are paid an hourly wage, on the other hand, you may need to figure out your gross income using last year’s tax return, or by multiplying your gross weekly income by the number of weeks you work within a year.

How to calculate your annual net income

If a credit card application is explicitly asking for your annual net income, you have some basic calculations to take care of. These steps can help you figure out the number to list on your credit card application.

Step 1: Determine your net annual salary

Start by including the annual salary you earn in your job, minus deductions from your paycheck such as taxes and retirement contributions. You can find this information listed on the tax return you filed last year. If you’re in a new job, you can check your pay stubs to look for your net income per pay period, then use that figure to determine your annual salary.

If your take-home pay is $600 per week after taxes, retirement contributions and premiums for health insurance are taken out, for example, your estimated annual net salary would be $31,200.

($600 per week x 52 weeks = $31,200)

Step 2: Include additional sources of revenue that apply

Additional sources of income can also count toward your annual net income, and you may even notice on some credit card applications you’re prompted to consider other sources of revenue.

On the credit card application for the Bank of America® Cash Rewards credit card, for example, it states that “alimony, child support or separate maintenance income need not be revealed if you do not wish to have it considered as a basis for repayment.”

The information about the Bank of America Cash Rewards credit card has been collected independently by Bankrate.com. The card details have not been reviewed or approved by the card issuer.

Likewise, you can list these sources of income if you do want them to be considered as part of your annual income. Other additional income sources you can count toward your annual net income can include:

  • Money earned from investments
  • Income from part-time jobs or freelance work
  • Social Security benefits
  • Interest earned in checking or savings accounts
  • And more

Also consider that, for the purpose of credit card applications, you can also list all household income when you apply per Consumer Financial Protection Bureau (CFPB) rules. This means that, if you have a spouse who earns more than you and you think their income would help you get approved, you can list it as part of your income. This change took place in 2013 and applies today.

Step 3: Come up with an honest estimate

From there, you can come up with an estimate of your annual net income that’s based on your income history. Add your net annual income and your other income together and list this amount on your credit card application.

Why do credit card applications inquire about your income?

Credit card issuers ask for your income on your application because they need to be sure you can repay your debt. While approval criteria for credit cards is considered proprietary information that banks are unlikely to share, they typically look at your income, your credit score and other factors to come up with a general idea of your creditworthiness before approving you.

Beyond protecting their own interests, Section 109 of the Credit Card Accountability, Responsibility and Disclosure Act (CARD Act of 2009) also requires card issuers to confirm applicants have the financial means to repay any amounts borrowed. Specifically, the Act states:

“A card issuer may not open any credit card account for any consumer under an open-end consumer credit plan, or increase any credit limit applicable to such account, unless the card issuer considers the ability of the consumer to make the required payments under the terms of such account.’

Why you should never lie about income in a credit card application

No matter how tempting it might be, don’t lie about your income on a credit card application. Knowingly listing false information on a loan application (or credit card application in this case) is considered fraud, thus you could wind up paying exorbitant fines or spending time in jail if you’re caught. It’s unlikely that a credit card issuer will dig into your income details after the fact, but it’s still not worth the risk.

Instead of exaggerating your income, we suggest making sure you’re listing all the other income you could use on your application — such as side hustle income or income from part-time work — to improve your chances of being approved.