Yellowstone Financial, Inc.

New Credit Rules for Stay-At-Home Spouses

You have a good credit score. Your family has a steady income and you spend far less than you earn.

You have zero balances on all of your credit cards and have no debt besides a reasonable mortgage. In spite of your sterling credit, recent rules issued may cut off new credit to stay-at-home spouses.

It all started with the best of intentions. Credit card issuers were guilty of many egregious affronts to consumers. They made the payments due on a Sunday, were closed for the weekend, and then called the payment late, levied fines, and revoked teaser rates. They applied payments to the debt with the lowest interest rate.

Chicanery in the form of “double cycle billing,” in which interest is owed for grace period purchases was commonplace. Interest rates on existing debt were hiked without cause once balances had built up. Finally, companies would flood college campuses with free giveaways and allow college students to qualify for credit cards with no ability to pay them.

The Credit Card Act of 2009 took effect last February and outlawed all of the above practices. It’s the provision targeted at college students that’s having unintended consequences for stay-at-home spouses. In order to prevent college students from accessing credit beyond their ability to pay, only the applicant’s income can be used to qualify for the card.

Credit card companies sought clarification from the Federal Reserve, which is responsible for the new rules. In April, the Fed published its final rule (link: http://edocket.access.gpo.gov/2011/2011-8843.htm) stating “that a card issuer consider a consumer’s independent ability to make the required payments on a credit card account, regardless of the consumer’s age.” The rules take effect in October, but credit card companies have started to implement them already.

What does this mean for stay-at-home or half-time working spouses? Previously you could apply for credit by putting down household income to qualify. Soon companies will only consider the income of the individuals applying for credit. Household income will not be enough.

Is this so horrible? Should a non-earning spouse be able to receive a credit card on their own? After all a joint credit card is still permitted, which can consider household income. Imagine that there may be times when you’d like to apply for a store card to qualify for discount on a big-ticket item, and your spouse may be at work or traveling.

More compelling is the case of a military spouse, with the breadwinner out on a nine-month tour of duty. People in abusive relationships may find themselves unable to access credit when they need it for an escape. Those who go through divorce or death of a spouse may need access to credit precisely when it can be denied to them.

Some of the authors of the Credit Card Act, including Rep. Carolyn Maloney, D-N.Y., are fiery advocates of women’s rights and seek to revise these rules. While this may happen, when a client recently asked whether a spouse without an individual credit card should apply for one, I responded that it’s a good idea now while household income can be used to qualify with some companies.

Being an authorized user may not be enough as this is merely the recognized permission of the primary cardholder to use the card. That permission can be revoked and in the case of death, the card issuer would have no duty to the surviving spouse to keep the account open.

Stay-at-home spouses should have access to credit in case disaster strikes through a joint or individual card. Even if you use it for one charge a year, it could ensure you have it when you need it.

Dave Gardner, for the Daily Camera.