Proposal for Credit Card Rule Change Could Hurt Stay-at-Home Parents

Many are expressing concern over a proposal concerning credit card reform laws known as the CARD Act(Credit Accountability Responsibility and Disclosure Act).

Stay-at-home parents could have a tough time getting a credit card in their name because of a Federal Reserve proposal meant to clarify parts of the legislation.

The CARD Act was designed to help consumers, but these credit card rules also have a downside. It's made credit card interest rates soar for those who are applying for new cards.

The issue surrounds a Federal Reserve proposal requiring creditors to only look at an individual's income instead of the household income when applying for credit.

The idea was to protect teens from getting credit cards with a large credit limit so that they don't rack up debt they can't pay off at a young age. But the Federal Reserve proposal requires all credit applicants to provide independent income information no matter how old they are.

That means parents who stay with the kids may not be able to get their own credit card. Here are some of the issues that opponents of the provision have pointed out.

1. Stay-at-home parents can't build up their own credit history.

If we know 50% of marriages end in divorce, there will no doubt be a lot of people who are left without access to a credit card when their marriage fails. You can't build a good credit history if you don't have one.

2. Stay-at-home parents and low-income earning spouses are placed in a subordinate role.

Marriage is supposed to be a partnership in which money and belongings are shared. It would still be possible for the working parent to co-sign for a line of credit. However, many people say this option is no good. That's because dual-liability would mean the credit score for both spouses could be adversely affected if the bills aren't paid.

3. It unfairly targets women

It's just a fact. There are more stay-at-home moms than stay-at-home dads. So more women are going to have a tough time getting a credit card in their name, and won't be able to build a solid credit score.

There's also concern that the provision could put women in abusive relationships in even more danger. Two Democratic congresswoman who helped draft the credit card law, but are against the Fed's proposal, have said that it would keep many women from being financially self-reliant.

"The availability of an independent credit card may represent her best chance at establishing independence and a path out of a dangerous relationship."

4. Retailers do not support the idea

The Federal Reserve's proposed rule would also apply to store credit cards. Many businesses are lobbying against the proposals. Retailers know that stay-at-home moms and dads are typically the ones making many purchasing decisions.

On the other hand, there are also groups that are supporting the rule change. For instance, the National Consumer Law Center has another perspective on stay-at-home parents with their own credit cards. The center points out that a person who goes into debt and then can't pay it off because they no longer have access to their spouse's income would "be in a far worse position than if she had never incurred the debt."

Personal finance guru Dave Ramsey takes a step further. He says no one should be using credit cards and people should stick to debit cards and personal checks, which the proposed rule doesn't affect in any way.

We get yet another view from the president of Consumer Education at SmarCredit.com. John Ulzheimer wrote in a blog post on Mint.com that he believes people will find a way to get credit and will inevitably end up going into debt no matter how many rules are made.

"Name one "avoidance" law that has ever succeeded. Prohibition, drinking age, driving age, controlled substances… has any of them really worked? People are still going to open and use credit cards, and can you guess why? They're going to open and use cards because they want to. And if history has taught us anything, it's that people who want to do something badly enough are going to figure out a way to do so, regardless of the legality."

The Federal Reserve was accepting public comment on the proposal up through the end of January. A final decision on the rules is expected in the coming months.


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Kasey Steinbrinck has written in the television radio and newspaper industries. He now creates web content for Check Advantage, which offers personal checks and business checks directly to consumers.