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What annual income do I need to be approved for a credit card?
Issuers consider your income to determine if you'll be a good borrower.
When you apply for a credit card, your income is an important factor that the issuer will use to determine whether you qualify for a credit card. But just how much income must you earn to be approved? And what other factors might be considered? Understanding this information can help you find a card that’s right for you.
Is there a minimum income requirement to get a credit card?
The answer is, not exactly. After the 2008 Recession, the Credit CARD Act of 2009 put new provisions in place to protect consumers. Although the Credit CARD Act does not set minimum income requirements, it does restrict credit card issuers from extending credit to someone who does not have the ability to make the required payments under the terms of the credit card account. But what exactly does that mean?
Simply put, a credit card issuer must take into account your ability to repay the debt. In order to determine someone’s eligibility, the card issuer will weigh several factors, including income. Specifically, issuers will look at your debt-to-income ratio — your combined monthly debt payments in comparison to your monthly income.
The Consumer Financial Protection Bureau recommends keeping your ratio to 43%. Issuers will look at this figure when determining how much you can afford to pay and will then set your credit card limit accordingly. This includes being able to make payments on a fully maxed-out credit card. Other important factors include your credit score and your credit history.
Credit card eligibility requirements help issuers reduce the risk of lending and allow them to offer you products that are appropriate for your financial circumstances. In turn, you can use these requirements to help you choose and apply for credit cards that suit your individual needs.
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What other sources of money could count as income?
You may qualify for a credit card even if you’re between jobs or are currently relying on government assistance. Many credit card issuers will look at other sources of income when deciding whether to approve you. In fact, if you’re 21 or over, federal law states that you can list the income of your partner, spouse or other household members on your credit card application, just as long as you have access to it. However, if you’re under 21, you’ll need to rely on your own individual income. This can come from any of the following sources:
- Retirement fund distributions
- Investment returns
- Social Security or pension income
- Inheritance or trust fund distributions
- Unemployment benefits
- Alimony, child support or separate maintenance income, if you will use it to pay your bill
- Liquid assets such as a savings account
Why do credit card companies check income
Card issuers check your income to figure out how much you can afford to spend on your card and still be able to pay off your debt. Based on this information and other factors, the card issuer can determine the size of your credit line. If your finances are a concern when looking for a credit card, review some of the cheaper credit cards available.
Why do eligibility requirements vary?
This relationship between income and credit cards can influence a wide range of credit card features, from the credit limit and interest rate of the card right through to complimentary extras or rewards programs.
In general, cards with high eligibility requirements will have more features than low eligibility requirements credit cards, but there are still many different credit cards you can choose from if you don’t earn a lot of money.
Other factors that affect your credit card application
Credit card issuers weigh a range of other factors before approving or denying your request for credit, including:
- Credit score.
The better your credit score, the more likely you will be approved. Credit issuers pull your report from one of the three main credit-reporting agencies: Experian, Equifax or TransUnion.
- Credit history.
Issuers like to see that you have a history of good credit.
This is the balance that you’re currently using on one single credit card compared to that card’s credit limit. A general rule of thumb is to keep your credit card debt to 30% or less of your spending limit.
- Employment status.
While credit card issuers typically prefer people to have full-time employment, you could still be eligible for some cards if you work part-time, are self-employed or if you have a pension or other source of steady income.
- Income vs expenses.
When you apply for a credit card, you will have to provide information about your current income, spending habits and any existing debts to help issuers determine whether you can manage more credit.
Credit card income requirements help issuers assess the risk of lending and give you an idea of what cards are available to you based on your financial situation. Now that you have a better understanding of minimum income requirements, you can compare credit cards to see which might fit your circumstances and needs.
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