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If you want a new credit card, you must disclose your income. But, your income may include more than what you think, thanks to the CARD Act.
Your salary is your main source of income, but what if you have access to other funds? Maybe you have a side hustle, or you get child support every month. Today, credit card companies use not only your salary to qualify you for a credit card, but your accessible income too.
It’s the law, so use it to your advantage the next time you apply for a credit card.
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What Is Accessible Income?
Accessible income, as the name suggests, is any money you have access to within your household. It’s not just your salary but can include many other sources of income you can use.
Think of it this way. Accessible income is any money you can get your hands on and use. It could be money in an account somewhere, the money you earn but not from a regular job, or even financial gifts.
What Does Accessible Income Mean?
It may seem strange that credit card companies care about your accessible income, but it’s for a good reason. They use it to assess your financial situation. If you make just enough to cover your bills and cost of living, for example, you’re at a higher risk of default than someone who has plenty of ‘extra’ income sources that could help.
For example, a person with extra income from tips, commissions, or earnings from investments has more income avenues than someone with a straight salary. In other words, the person with ‘extra’ income has diversified income and can afford more than the person whose income remains the same each month.
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What Counts As Accessible Income?
Accessible income is any of the following:
Side hustle income
Investment income (stocks, real estate, etc.)
Government pay (Social Security, disability, etc.)
Alimony or child support
Savings or checking accounts
What Doesn’t Count As Accessible Income?
Most income counts as accessible income unless there’s a debt tied to it. For example, if you took out a home equity line of credit on your home, the money from the account doesn’t apply.
The same is true of any money borrowed on a personal loan, cash advance on another credit card, or money borrowed from a friend or relative.
If you are between the ages of 18 and 21 years old, the only income you may count is money you earn at a job, allowance, and grant or scholarship money.
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How Do I Calculate My Accessible Income?
It’s important, to be honest in your assessment of your accessible income. Credit card companies typically don’t require verification, but you never know if they will.
Plus, it doesn’t do you any favors to exaggerate your income. If a credit card company approves you for a line of credit higher than you can afford to repay, it only puts you in a worse financial position.
To calculate your income, try this:
Add up your regular income (if you earn a salary, divide the total by 12)
Add up any income you make from part-time jobs.
Average any side hustle income you make (driving for Uber, freelance gigs online, etc.)
Average any investment income you earn
Add your alimony or child support if applicable.
Annualize any other income
Your total accessible income is the total of all the above. If you only occasionally receive certain income types, average it out over 12 months to get your monthly total. For example, if you make $200 every three months driving for Uber, you make $66 a month or $800 a year.
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Accessible Income on a Credit Card Application
Today, credit card companies cannot deny an applicant for insufficient income if they can document accessible income. This means credit card companies must consider all income, including regular salary, and any miscellaneous income or assets discussed above.
The key is documenting or proving your income, though. You can’t just say you make $1,000 a month on side work or get paid $500 a month in child support. You must prove it.
How Is Accessible Income Verified
More often than not, credit card issuers take your word for it when you apply for a credit card. They pull your credit report, look at your score, and analyze your credit history to get a good idea if you can afford the minimum payments on a credit card or not.
Sometimes, though, they ask for proof of your income, including your accessible income. While it’s not as easy to prove income like child support or financial gifts as salary, you must have some type of paper proof.
Bank statements are excellent proof of receipt as they show evidence of the deposits. Any check stubs, award letters, or canceled checks you have are also concrete proof of your income.
The key is never to lie on your application. Even if you know a credit card company doesn’t verify your income, you commit fraud if you lie, resulting in financial penalties or worse.
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Quick Tips for Managing Your Accessible Income As An Immigrant
If you have accessible income, consider the following ways to manage it (and not overspend):
Put the money in a high-yield savings account. You’ll earn slightly higher interest rates, and the money will be harder to access, which means less frivolous spending.
Invest the funds. You don’t need a lot of money to invest. The earlier you invest, the more time your funds have to grow.
Set a financial goal. Figure out what you want to do with your accessible income. For example, do you want to save for a house or a car? Set a dollar amount and timeline. It’s easier to save the money (and not spend it) when you have a goal.
Hire a financial advisor. If it’s all too much, hire a reputable financial advisor who understands the issues immigrants face and can talk to you in terms you understand.
Accessible Income May Help You Get the Credit Card You Need
Accessible income is more than a deposit in your bank account. It improves your financial situation and makes you a better borrower. Even if you don’t receive your side income or other income sources as regularly as your paycheck, it’s still income, and credit card companies can count it.
Any money you can bring in and prove may help you secure the credit card you need. Just make sure you use credit cards responsibly to avoid getting in over your head in credit card debt.