What Counts as Annual Income for Chase Application Purposes?
 

This topic has been touched upon in some threads but further discussion is needed, methinks.

Case in point: My wife is a commissioned salesperson. Her year-to-year annual income can vary by tens of thousands. Indeed, she just landed a million-dollar order with a 5% commission (that's on top of her already 7-figure sales). Should I bump up her annual income by 50 grand now?

What counts as income? Is it last year's income? Is it last 12 months' income? Is it this year's expected/estimated income? Does only earned income count? How about unearned? If one plans to pull money out of, say, an IRA this year, does that count? What if one ends up not pulling it out? Or pulls out substantially less than planned? What if a new grad (with very little income) has accepted a lucrative job offer; is that as-yet-unrealized salary what should be reported? Or who cares because Chase is never gonna verify income* anyway?

*Yes, I know business card applications can get scrutiny, but that's another can of worms.

Chase has answered many of these questions:

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Thanks. I never noticed that rollover before.

This. I just put a round number down that's close enough to reality. No card issuer has ever checked, and I still have way more credit than I need.

I've sometimes wondered if the increase in value of investments counts as income (for example, see Income - Wikipedia) or if the proceeds from a sale of an asset counts as income (rather than only the profit on a sale).

I would justs stick to the card issuer's definition. As you can see with Chase, it is broader than the IRS definition in many respects.

I cannot imagine any situation in which valuation, as opposed to proceeds, counts. Would you reduce your income in a bad year if the value dropped?

Indeed. This begs the question: Why lower one's CLs before applying for a new card? Simply report greater income. Voilà!

Sure, if one "intends" to liquidate it or a portion thereof. It becomes expected income. (See below.)

But is it a "definition"? The wording is expansive, nay, whimsical! One could "expect" to liquidate one's every asset and thus count net worth as expected income.

(See above.)

Chase does not really define income, it just says "what you reasonably expect to earn" and lists some examples of sources.

Can I reasonably expect to earn the IRS RMD amount from my portfolio, even if I'm not actually withdrawing?

If I sell a stock for $100 and it has a basis of $75, is my income $25 or $100? Different sources give different answers. Which complies with Chase's definition?

The wikipedia article I linked lists increases in valuation as income. I'll admit this is a stretch.

I don't think it is "reasonable" to "expect" to do something which you have decided not to do. I also do not think Chase cares about the distinction between "basis" and "gain", only about cash flow.

And I don't think it's "reasonable" to "expect" that a decision made now cannot be rethought later.
And expected cash flow too.

What if I'm not sure how much to withdraw?

I've actually asked this a number times by secure message. Answers have been wildly inconsistent.

I agree with you that cash flow is the better answer. I would think what they really care about (or should care about) is capacity to repay.

Doubtful that front-line customer service people are going to provide definitive advice or that credit risk and compliance provide individual customer advice. When credit tightens as it like will, Chase and other institutions may not look at this favorably. No way to predict, so it's really a personal risk management issue.

I've had the naïve hope that the people who answer Chase secure message questions would check when they are not sure of an answer, but experience has disabused me of that notion. I've had much more luck with front-line phone people, some of whom actually do check (or at least put me on hold) when they don't know the answer.

Wasn't there recently a wave of tightening, such as reducing credit lines and closing little used cards (perhaps at other issuers)? I may be misremembering or overinterpreting anecdotes.

Chase's definition is what you could reasonably expect to use as an annual income. This is not the same as the maximum amount you could withdraw. Reasonable expectation does not imply certainty, but it does require plausibility. If you have been withdrawing 4% of a retirement account balance each year, I'd say it's not plausible to assert that your income is the full value of your retirement account, even though you "could" withdraw it all.

Yes. The harder question is whether you could reasonably expect to withdraw 4% even if history has been lower. In my secure messages to Chase I usually specify 3% as an example. Sometimes they've said this is fine, sometimes they've replied with gibberish. They've never responded by saying no. As noted above, relying on their answers may not be wise.

By the way, I've never actually specified more than actual cash flow, but would like the answer to this, especially since I've had people ask me this question and have seen it asked on financial forums.