Credit cards can be useful for emergencies, travel, or for building or rebuilding credit. If you're thinking of applying for a credit card, of course you should shop around for the best terms, but you'll also need to pay attention to the qualifying criteria, such as the correct way to calculate annual income on the application.
Annual Household Income
Annual household income is the combined gross pay -- before taxes are deducted -- of every income-contributing person in the home. The income can be from any source or multiple sources, such as part-time work or self-employment. You can also include alimony, child support or other maintenance income, but you're not required to do so by U.S. law if you don't want it to be considered.
Annual Individual Income
If you're applying for a credit card solely in your name and the application asks for annual individual income, you cannot include the income of anyone else in the household -- not even that of your spouse. This is so you're not granted credit beyond your ability to repay. If you live in a community property state, you may be excepted from this individual criterion, depending on how that state treats spousal income.
How to Qualify With No Individual Income
If the card issuer requires, or if current credit card laws require, qualification based on individual income, it can be difficult for some people to qualify for a credit card, such as a spouse who's a stay-at-home parent. In these cases, you can apply jointly so your spouse's income can be counted. You can also be added as an additional cardholder onto the account of the qualifying applicant.
Other Qualifying Factors
While income is an important factor for the card issuer because it indicates an ability to repay, it may not be the only consideration when approving a credit card application. Banks issuing credit cards will usually check your credit report for payment history and a credit score. They may also consider your employment history, whether you own a home or rent and your monthly housing payment, and how long you've lived at your current residence.
Based in Central Texas, Karen S. Johnson is a marketing professional with more than 30 years' experience and specializes in business and equestrian topics. Her articles have appeared in several trade and business publications such as the Houston Chronicle. Johnson also co-authored a series of communications publications for the U.S. Agency for International Development. She holds a Bachelor of Science in speech from UT-Austin.