stated income for credit card / travel hacking

[Another Reader]

Those are not income. I think what they are looking for is income that is subject to tax and income that is not subject to tax, but in both cases income. So technically, the latter would include municipal bond income and SS that isn't subject to tax (significant for low/middle income applicants).

For real estate, I think they would be talking about net Schedule E income (that is included in total income on 1040) and not gross rents.... though I could see a valid argument for Schedule E with depreciation added back... ask them.

I think that's how I would look at it as well.

I really don't think the Chase people thought this out. My guess is that it would be a waste of time to ask anyone on the phone. I might stop by the branch at some point and ask one of the private bankers that has bird dogged a couple of other problems for me, if they pester me for the information.

 

[Senator]

I put my income that is on my 1040 form, and add back in depreciation. It is considerably higher than my actual taxable income.

It really doesn't matter what you claim as income, as long as you can pay it back. When you take out a mortgage, they add back in depreciation.

The higher your income, the higher your credit limit is. That helps your credit score when you do not use the full limit.

Credit card companies are more looking at what your other cards limits are, and what your credit score is. Then they take a calculated risk.

I would not feel guilty about overstating, or understanding my income on a credit card application. Not the least bit guilty.

 

[SecondCor521]

It really doesn't matter what you claim as income, as long as you can pay it back.

[...]

Credit card companies are more looking at what your other cards limits are, and what your credit score is. Then they take a calculated risk.

I would not feel guilty about overstating, or understanding my income on a credit card application. Not the least bit guilty.

Agree on the first sentence. But I think the credit card companies, with millions if not billions of data points and historical information, professional risk managers with the company's money on the line, and more objectiveness, are far better at assessing risk than any individual consumer is. (That is also why I don't do hard-money lending or invest in any of the P2P lending sites' customers.)

The credit card companies' calculated risk, if based on inaccurate inputs, is more risky than they understood, intended, or wanted to take. I think that's unfair to them.

I'd feel guilty if I intentionally overstated income, underestimated my risk of failing to pay it back, and the credit card company suffered a loss. Yes, it's a big, faceless corporation, but if I did that I would consider it lying to gain an unearned advantage.

 

[RobbieB]

I get these from time to time. We want to increase your credit limit please verify your income. Yup, put in your 1040 info.

 

[Senator]

Agree on the first sentence. But I think the credit card companies, with millions if not billions of data points and historical information, professional risk managers with the company's money on the line, and more objectiveness, are far better at assessing risk than any individual consumer is. (That is also why I don't do hard-money lending or invest in any of the P2P lending sites' customers.)

The credit card companies' calculated risk, if based on inaccurate inputs, is more risky than they understood, intended, or wanted to take. I think that's unfair to them.

I'd feel guilty if I intentionally overstated income, underestimated my risk of failing to pay it back, and the credit card company suffered a loss. Yes, it's a big, faceless corporation, but if I did that I would consider it lying to gain an unearned advantage.

I think income and ability to pay back a credit card is more loosely correlated than most people would think. Combined with high-interest rates, income is probably a distant factor in credit limit decisions.

 

[swakyaby]

I was on the side of answering the income question with a reasonable percentage of assets one is living on in retirement, if one is no longer earning income. And Running Bum’s quote that credit companies look at debt-to-income ratios or debt-to-asset ratios when determining how much credit to extend seems to support my response. I have a Capitol One VISA card (1.5% cash back) that I applied for while earning a good income, gave a lower-than-actual income answer, and received a credit limit of $15K. Subsequently, I applied for a Fidelity VISA credit card (2% cash back) using the same income estimate even though I was now retired. To my surprise, Fidelity gave me a credit limit of $25K. I think it was because they saw what assets I held at Fidelity as a private client, and based the credit limit on that?

 

[Another Reader]

I get these from time to time. We want to increase your credit limit please verify your income. Yup, put in your 1040 info.

Doing that would grossly underestimate my income and capacity to carry credit. Depreciation is a non-cash expense and does not reduce my cash income. As Senator pointed out, for mortgage qualification, depreciation is added back to income.

I'm inclined to take the same approach with the credit card company if I have to answer the question at some point. To be fair, I probably should subtract the portion of SALT expenses that I'm not allowed to deduct. I will probably talk to the local banker first, though.

 

[audreyh1]

My mistake on the $78,750. Somehow I was thinking of spendable income. However, if your deduction is $24,400, does that income not disappear before you get to taxable income?

Some of these questions may be framed so as to meet government reporting requirements for loss risk. What they should be interested in is how much income arrived in your bank account, available to be spent.

No. The entire AGI is taxable income. It doesn’t matter that the tax computation involves subtracting deductions or that some income is taxed at a 0% rate.

 

[Another Reader]

No. The entire AGI is taxable income. It doesn’t matter that the tax computation involves subtracting deductions or that some income is taxed at a 0% rate.

I guess I am being too literal. To me, taxable income is what appears on Line 10 of the 1040.

 

[ILikeStarTrek]

This is the OP checking in. For the credit card I mentioned applying for in my post, I got a letter telling me I was turned down because my debt-to-income ratio is too high.

When I had a full-time job making over $100,000, it was no problem applying for credit. But like I said in my post, without income from a job, my AGI on my tax form looks really low. I did have some job income in 2018 before I retired but I think it was about $50k. I don't remember the exact income amount I put down on the credit card application, but I think it was something like $40k to $50k.

I own several rental houses, and have mortgages on over half of them. My total mortgage debt is several hundred thousand $$. But my rental income looks like almost zero on my income tax, since I depreciate all my rental houses. Since most of those that replied in this thread said I should use my AGI when I apply for credit, that's going to be so low for the next few years that I'll never be approved for any credit.

But "Another Reader" and "Senator" suggested in their posts that I should add depreciation from all my houses back to my AGI to arrive at a stated income when I apply for credit. I'll have to run the math, but adding depreciation will definitely result in a much higher number for my stated income. And from the rejection I just got, this is the only way that I will qualify for credit in my current, retired state.

 

[pb4uski]

I seem to recall another thread where RB found some information suggesting that you include items that could be used towards credit card payments... under that construct, I think you could validly include your net real estate operating cash flow (income less expenses ignoring depreciation) along with pensions, interest, etc.

 

[RunningBum]

See my post #21 in this thread.

 

[Sunset]

You can put any reasonable number down for income, they don't check. I'd use a number close to the income reported on my tax return.

I think any reasonable number is fine.
People really over think this, how about including all the rebates a person might get on products

I always just put down: $110,000 Its a number I pull out of the air.

Nobody has ever asked for my tax return on Credit Card applications, and I currently have about 9 cards. I could in any year pull $110K out of my IRA so it's a reasonable number.

 

[CaptTom]

What about all those prompts on line which ask you to confirm your income after you log on? I usually just dismiss them. Sometimes that takes a bit of effort, but there's usually a way.

What are they gonna do? Cancel my card? I've been with them for years. Always paid on time. If I didn't go onto the web site I'd never get the prompt, so they'd never get their "confirmation."

I don't want a credit line increase. I don't want targeted ads based on my income. I don't want offers for different cards with different perks.

 

[Senator]

I think any reasonable number is fine.
People really over think this, how about including all the rebates a person might get on products

I always just put down: $110,000 Its a number I pull out of the air.

Nobody has ever asked for my tax return on Credit Card applications, and I currently have about 9 cards. I could in any year pull $110K out of my IRA so it's a reasonable number.

Exactly. Credit card companies make a calculated risk, based on your your credit score and payment history. That is why they charge high interest rates, as they have a high-risk venture.

When you first get a card, it is typically a lower amount. They will (mostly) raise it if you ask, or pay on-time for a while.

Sam's Club Master card is still limited to $10K. I can't get that raised to $50K like my other cards.