Stating your income is mandatory on a card application, but voluntary once you have been approved. However, card issuers need income information to offer you a credit limit increase under Credit CARD Act rules.
If you’re like most adults, chances are you’ve applied for one or more credit cards in the past and you know that stating your income is a requirement of the application process. In fact, credit card issuers are required by law to request financial information (including income) on credit card applications to make sure the consumer makes enough to pay for their purchases.
But what does it mean when your bank or credit card issuer requests an update to your income after you’ve already been approved and are using your card? Is this something to worry about? Is it also a requirement like when you first applied or is it voluntary? Is it even advisable to keep your income information updated? These are some of the most common questions that come to mind the minute you receive a message from your bank requesting you to update your income, and we’ll cover them all below.
Why is my credit card issuer asking for an income update?
In the past, banks were allowed to issue lines of credit to anyone based solely on their credit score. This means that they didn’t consider how much you made or whether or not you would be able to pay for your purchases. But so many people accumulated high credit card debt they couldn’t pay, which resulted in a heavy blow to their credit score and banks having to write the debts off as losses.
In order to prevent this from happening, the government put in place several regulations, one of which was the Credit CARD Act of 2009, which established the rule that issuers should verify a consumer’s ability to pay before opening new accounts and establishing new lines of credit. This is why you’re required to provide your income information during the credit card application process.
However, no law currently requires credit card issuers to keep track of your income over time, so why do they request an update?
Having your bank or credit card issuer request an update to your income is nothing to worry about. It doesn’t mean that anything is wrong or that they suspect you’re earning less than you were before (even if you are).
The most likely reason your credit card issuer is requesting this information is to assess if your credit limit and credit card rate match with your current financial situation. Based on your updated income, they may consider increasing or decreasing your line of credit, or perhaps offering new products or services.
Am I required to update my income with my credit card issuer?
Now that you know why your bank wants this information, you’re probably wondering whether or not you have to give it to them. The answer is no, you don’t have to. Providing updated income information to your credit card issuer is strictly voluntary.
That said, since increasing your line of credit does require the bank to verify that you’re able to pay, they won’t be able to automatically give you a higher credit limit unless you update your income (if it increased, of course).
So, although it’s voluntary, there is still the question of whether or not you should update your income. There are situations in which it makes sense to do so, but there are others in which it doesn’t.
When does it make sense to update your income?
The only scenario when it makes sense to update your income is when it increases. However, it may not always be necessary to do so. Suppose you’re earning more money than when you applied to your credit card, and you’re interested in increasing your credit limit. In that case, you should update your income with your bank, especially if the bank requested it. This makes it more likely you’ll be approved for a credit limit increase in the future, either automatically or by your request.
Even if your income has increased, however, if you’re not interested in getting a credit limit increase or applying for new financial products with your bank or credit card issuer, then it’s not necessary to update that information. In fact, it may even be better to keep it lower in case you run into financial problems down the road since having a lower reported income will make it easier for you to negotiate better payment terms if need be, among other things.
When doesn’t it make sense to update your income?
On the other hand, if your income has gone down since opening your credit card account, it’s inadvisable to update it. The reason is that if you report a lower income, there’s a chance that the credit card issuer will lower your credit limit as well. Besides not having access to the same purchasing power, having a lower credit limit can also hurt your credit score because it increases your credit utilization ratio, even if you carry the same balance as before.
What happens if you don’t update your income when your issuer requests it?
There are no direct consequences of not updating your income. Remember, it is not required by law, and your issuer won’t take any measures against you like closing your account, lowering your credit limit or raising your rates. The only real potential consequence is you may be less likely to receive a credit limit increase or you could miss out on the offer of new products or services you may be interested in.
How to update your income with your credit card issuer
If you decide to go for it and answer your issuer’s request for updated income information, the process is fairly simple. You can go about it in two ways:
Through a customer service representative
For some, the easiest way is to call the customer service number on the back of your credit card. Once you’re connected with a customer service rep they’ll update the information for you. Just make sure you have all your personal and account information on hand to make the process smoother.
Through your online credit card account
For all those digital natives out there, it may be easier or even more natural to update the information through your credit card’s mobile app or website. Although the process is slightly different from issuer to issuer, this usually involves:
- Logging into your online account
- Navigating to your profile and then to the personal information section
- Selecting the option to update income
- Typing in your new annual income
- Hitting the “Update” or “Confirm” button
It’s up to you whether or not you want to update your income information. Keep in mind that it is a very simple process, and there may be some benefits to doing so, like increasing your chances of getting a credit limit increase.
But if you’re not interested in pursuing that or your income has gone down since opening your account, don’t feel pressured to do it. In any case, remember that it is not required by law, and you won’t face any consequences for not answering the issuer’s request.