Why Your Bank Wants to Know How Much You Make
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Here's your money briefing for Friday, June 30th. I'm J.R. Whalen for The Wall Street Journal. Banks and credit card lenders can see how much you spend, but they don't know for sure how much you make.
You would think that your bank knows everything about your financial life. However, how much money you make tends to be a place where they're typically flying blind. So the monthly credit reports that they get from agencies, they really only tell a bank how good you are at paying your bills, not about how much money you're bringing in.
We'll talk to WSJ personal finance reporter Amani Moiz about why banks want that information. That's after the break.
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Banks are sending out more requests for annual salary information from their customers. Wall Street Journal personal finance reporter Amani Moise joins us to explain why and whether customers are obligated to respond. So, Amani, wouldn't the bank already know your annual income?
Why are banks suddenly asking customers for annual salary information?
They could get that from the credit reporting agencies or figure it out based on your credit card spending or your direct deposits, right?
It's interesting that you say that, and you would think that your bank knows everything about your financial life. However, how much money you make tends to be a place where they're typically flying blind. So the monthly credit reports that they get from agencies, they really only tell a bank how good you are at paying your bills, not about how much money you're bringing in. And outside of your primary bank account, where you maybe have direct deposit set up, most credit card lenders don't know how much people make.
So do they want to know just your salary or all of your assets like your investments?
They want to know your earnings. So if you have investment income, you could include that. If you have something like child support payments or some other type of annuity, you could include that. And you could even include your spouse's income. They just want to know how much money you have coming in available to pay your bills in a worst case scenario.
Is that the primary reason they want to know all this?
Yes, it's a form of risk assessment. So credit card loans aren't secured like a mortgage or a car loan.
How well can banks already estimate my income from credit reports and spending?
So they want to make sure that their customers continue to have an ability to pay.
So in some cases, banks are making repeated requests for salary information, as opposed to maybe once a year. Why the urgency?
You have to look back on the last few years, especially what's happened in the job market, right? We've had the great resignation. People were switching jobs at a record pace or quitting, moving into the gig economy. And then we started to see headlines about layoffs, right? The likelihood that a bank customer has switched jobs and had their income situation change over the last few years is much higher today than it has been. And the banks have really ramped up efforts to try to get this information. So emails and letters sent out to customers requesting new income information is up 500 percent over the last three years.
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