The Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009 included provisions that made it difficult, if not impossible, for stay-at-home spouses to qualify for credit cards. Before this act became law, consumers could apply for credit cards and list their “household income,” regardless of whether the income was earned by them individually or by their spouse or live-in partner. The CARD Act made it more difficult for people to access credit cards, especially stay-at-home spouses without income of their own to report.
The CARD Act Prevents Stay-at-Home Spouses from Credit Approvals. Under the CARD Act, which was enacted in 2009, the Federal Reserve issued regulations that require a credit card issuer to verify the individual credit-card applicant has income or assets available to make payments on a credit card—without taking into consideration the household income. Those who stayed home to maintain the household due to illness, to raise a family, or for any other reason would be denied a credit card in his or her name.
The CFPB researched the situation and discovered that many stay-at-home spouses who are otherwise credit-worthy have been declined credit cards in their name due to not having employment outside the home. These individuals are often able to make the payments with the household income earned from their spouse or partner.
Benefits of Proposed Changes to CARD Act. The proposal for changes to the CARD Act would allow a non-working spouse or partner over the age of 21 to report the shared household income from the working spouse or partner in order to apply for a credit card in his or her name. The change would apply to all applicants—regardless of their marital status—so long as they have a reasonable expectation to third-party income. Having the ability to obtain a credit card in your name as a stay-at-home spouse allows you to start building a credit history independently from your spouse or partner. There are countless stories of couples who separate after years or decades of living together on one income and the spouse who remained at home to care for the home or children does not have a credit history in his or her name—and then has an extremely difficult time once they are on their own.
According to the CFPB, there are more than 16 million married couples who maintain the household and do not work outside the home. These proposed changes to the CARD Act would allow approximately one out of every three married couples the ability for the stay-at-home spouse to obtain a credit card in their name.
Potential Disadvantages of the Proposed CARD Act Changes. Despite the benefits for millions of stay-at-home spouses for loosening these credit-card standards, many feel these changes would send many families further into debt and create long-term financial problems.
When an individual with income applies for a credit card, his or her amount of debt is compared to the amount of income earned each year. If the outstanding debt is too high, along with other factors considered for creditworthiness, the working individual will be denied a credit card.
The proposed CARD Act changes will possibly end up approving individuals for credit cards who have adequate household income but extensive debt. If a non-working spouse has no credit history or debts in his or her name—when he or she applies for a credit card and reports the household income—the credit-card issuers are not going to see the amount of household debt. These individuals will get approved based on the household income, but they still won’t have the means to repay their credit-card debt if the household income is tied up elsewhere.
Debbie Dragon is a contributor to MyBankTracker.com, where she writes about personal finance, taxes, and banking.