Credit card companies go to great lengths to avoid lending to financial deadbeats. Because of this, credit card applications are often so complex that they seem invasive to some consumers. While the idea of turning over sensitive financial information -- such as your bank balance -- to a credit card issuer might make you cringe, it isn't personal. Verifying an applicant's income and assets helps credit card companies avoid lending to individuals who aren't likely to repay their debts.
Reason for Verification
Once upon a time, before the Credit Card Accountability, Responsibility and Disclosure Act went into effect, credit card companies asked applicants personal financial questions, but they rarely required documentation to back up the responses. The CARD Act's restrictions -- such as limiting when a creditor can increase a card holder's interest rate -- and decreasing marketing opportunities have cut into the industry's profits. So don't be surprised if your credit card provider insists that you provide copies of your bank statements, Forms W2 and other financial records before it will approve your new account.
Bank Account Documentation
Your bank account information is highly sensitive, making it a gold mine for identity thieves. Because of the potential for disaster, banks are very protective of their customers' banking information. Banks are so protective of their records that not even government agencies, such as the IRS, can get their hands on your account information without valid legal grounds. If your credit card company wants a copy of your bank statements, you must obtain the paperwork and submit it voluntarily. The credit card company can't strong-arm your bank into handing it over without your knowledge or consent.
Protecting Your Information
Identity thieves can do significant damage beyond cleaning out your existing accounts. Armed with your personal data, they can open new credit and loan accounts in your name and leave you facing a financial mess that could take years to clear up. Anyone could be a potential identity thief -- including credit card company employees. You can provide the credit card company with the documentation it wants while simultaneously protecting yourself from identity theft by using a marker to black out sensitive material, such as your bank account number, on your bank statement. The credit card company doesn't need your bank account number to verify that you do, in fact, have a bank account and that it contains the amount you claim.
Bank Account Levy
After your credit card company approves your application, it has little interest in your bank accounts, provided you make the minimum payment or more each month. If, however, you default on your credit card agreement and the credit card company sues you, your banking information becomes a priority. After a lawsuit, your creditor receives a judgment. A creditor armed with a judgment can force your bank to disclose financial information, such as how many bank accounts you own and how much those accounts contain, in order to further its collection efforts.
- U.S. Government Printing Office: CARD Act (Title I,III/p. 4,6,16)
- Lawyers.com: Credit Card Companies Want to Know More About You
- Access Reports – Freedom of Information: Right to Financial Privacy Act (Section 3403)
- National Science Foundation – Office of the Inspector General: Identity Theft – What Can You Do to Protect Yourself? (p.1)
- NOLO: Collecting From a Judgment Debtor – Wage Garnishment, Property Liens and Bank Account Levies
- Digital Vision./Digital Vision/Getty Images