A Positive Change To The CARD Act For Stay-At-Home Spouses

A Positive Change To The CARD Act For Stay-At-Home Spouses

Imagine that you are a stay-at-home mom or dad. You went to university or college, obtained that degree or diploma, and soon entered the workforce. Eventually, you settled down with someone, possibly had a child, and then stayed at home to look after your bundle of joy. You always paid your bills on time and your credit was stellar. However, when you went to apply for a new credit card, strangely, you were denied. Why? Because you no longer had income of your own, and the only way to get a credit card was to have your partner on that credit card too. Your excellent financial history suddenly seemed to disappear, and that was frustrating.

This scenario, and its variations, has affected stay-at-home spouses since the Credit Card Accountability Responsibility and Disclosure Act, simply called CARD, came into effect in 2009. This law required that credit card issuers had to determine an applicant’s ability to make payments on the card before allowing that applicant to open up that credit card account. The point of the law was to prevent students from getting into a bad financial situation over credit card debt, but this unintentionally affected the ability of stay-at-home spouses to get their own credit. Even if you had excellent credit, you were denied the ability to get a credit card simply because you personally did not have an income.

Before this act came into being, the applicant could apply simply using their household’s income. But now, for stay-at-home spouses without an income, they would be denied credit cards. The only way to get them is to have a joint card with their spouse.

Due to outcry from stay-at-home spouses, the Consumer Financial Protection Bureau (CFPB) has proposed changes to the current act. These changes would allow married or common law partners who are 21 years and older to use a third party income, namely their partner’s, when applying for a credit card, according to the article at Life Inc. During the application, the shared income is considered, not only the income, or lack thereof, of the stay-at-home spouse. After all, stay-at-home spouses presumably have the ability to make payments on a credit card due to the financial structure of their relationship with the working spouse and therefore they should be able to get a credit card in their own name. There is a reasonable expectation that the stay-at-home spouses would have access to income and can make payments.

Under the proposal, the creditworthiness of stay-at-home spouses would be determined by the following: a salary being deposited into a joint account, regular funds being transferred into the non-working spouses account, and the applicant getting the benefits of the income.

This is especially important as many stay-at-home spouses are in charge of finances or used to work before becoming a stay-at-home spouse. If they had a decent credit rating before becoming a stay-at-home partner and paid off their credit cards before, then chances are, they will still be a decent risk. They can still continue to maintain their stellar credit scores, which helps protect the consumers’ interests and credit history. Other side benefits of this would help spouses who need to exit a troubled relationship – if they have their own credit, they can rent a new home or purchase what they need to start again. It also promotes equality in the home by demonstrating that the income is shared rather than belonging solely to the working spouse.

As for banks who are worried that they may not get paid – examining the applicant’s previous creditworthiness can help alleviate some of those fears Credit Repair firm Lexington Law points out.

While these are great proposals, these changes do not address same-sex couples or stay-at-home spouses who are under the age of 21.

If you are, or if your partner is, a stay-at-home spouse, then the change in the CARD act is great news! Creditworthiness doesn’t stop when one partner stops working, and this change would recognize that fact.

This article was written by author and blogger Chase Sagum. Chase covers Financial and Economic topics from a political perspective around the web.

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