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Stay at Home Moms Face Credit Card Challenges

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Credit in America has really changed since the banking crisis a few years ago. Gone are the days of practically free credit and rebuilding or establishing credit post-foreclosure, post-bankruptcy or even post-divorce is an entirely too common task.

However, one of the categories of people who face more struggle than ever before are a very critical and under-valued piece of society. Stay at Home Parents.

No Tangible Value

There are numerous studies which show the value of a stay at home parent in dollars and cents but as far as banks are concerned this type of employment really has no tangible value. Anyone with children understands being a stay at home parent (by choice or not by choice) is still a full time job but banks are not known for their logical lending or sense of humanity. A 2009 credit card law, the Card Act, made changes to how people can qualify for credit cards.

Under the act, a person can only qualify for a credit card based on their own income, not the household income. This was designed to prevent people from obtaining cards or receiving offers when they couldn't afford the bill. It was primarily targeted at college students but many stay at home parents now find themselves trapped in this category.

More recent changes to the bill have even made it difficult or even impossible for stay-at-home spouses to qualify for credit cards and some parents have begun protesting the law as unfair and discriminatory. The Consumer Financial Protection Bureau has said they will review the act and see what can be done to protect the rights of non-working spouses but many stay-at-home parents will continue to face a struggle of obtaining credit without the use of household income for the foreseeable future.

Well, maybe not these housewives but the average person doesn’t have access to these "legal" channels of free credit.

Why It's a Problem

At first glance, the Card Act doesn't seem to be a major problem. After all, people should be able to pay off their own debts, and credit card companies are only trying to ensure that payments will arrive regularly by choosing only applicants with income. Viewed from a purely financial angle, restricting card applications to people with jobs makes sense and is hardly discriminatory. However, the reality of stay at home parents is not just black and white.

Some couples choose to have one person stay at home to raise the children. This could be due to the obvious benefits of having a parent more involved in their children’s lives or just a simple financial decision on how much it would cost to secure the help needed in comparison to the income earned if that person were to stay employed.

Why Should Stay at Home Parents Get a Credit Card?

Although stay-at-home parents of both sexes are common, women are much more likely to live in this role and there are numerous reasons why stay-at-home moms (and dads) should be able to get their own credit cards, regardless of their incomes:

-- All people need independent lines of credit

The value of good credit can never be over-stated. Although you may not need credit to cover expenses now, a stay-at-home mom needs to establish credit for emergencies, such as a divorce or the death of her husband. A suddenly-single woman with no credit history will have an impossible time getting housing, buying a car or even qualifying for medical assistance.

-- A spouse's spending habits will define your credit

If a person's spouse is financially irresponsible, their use of a joint credit card will affect your credit as well. This is especially important in divorce situations, where one spouse may be tempted to spend irresponsibly on a credit card as a way to ruin the other person maliciously.

-- Credit cards provide financial freedom

People in abusive relationships may not have any way of escaping the marriage unless they have access to money. Without any way to qualify for credit without a spouse's permission, they may be trapped.

These are just a few reasons why almost 35,000 people have signed a petition to change this act.

Beyond the practical implications of the Card Act, many people find that it devalues their role as homemaker.

Although being a stay-at-home spouse doesn't have a direct income, it does play an important role in the home's financial health.

By having one spouse stay at home to care for the home and children, the working partner is able to focus more time and effort into work outside the home. This effectively increases the household's wages, making the stay-at-home parent an equal partner, not a financial dependent.

Moreover, the non-working spouse is often in charge of the household's finances. Because these people have the majority of purchasing power and make the final decision in financial matters, it only makes sense that they should have the ability to choose whether to get a card rather than having that choice made for them.

How Can a Stay-at-Home Mom Get a Credit Card?

While the CFPB reviews the situation, stay-at-home spouses do have a few options for establishing credit and financial assistance even if they do not qualify for a standard credit card. Some of these methods are fairly easy, while others will require more effort, and it's up to the individual to decide what works for them.

Get a Joint Card

The most obvious solution, especially in the short term, is to take out a joint card with your spouse or request to be added as an additional card-holder for their preexisting card. Joint account-holders are affected equally by all purchases, so your credit score will improve as you use and pay off the card.

This works better for some households than others. Couples that communicate openly and honestly about finances should have no problem with maintaining a joint credit card. On the other hand, some people want the freedom and flexibility of an independent line of credit that will not be determined by their spouse's credit or actions.

Apply for a Secured Credit Card

Secured credit cards are easier to get than traditional cards because they have collateral. Usually this collateral is in the form of cash payments and up-front deposits made to establish the card. In this respect, they work similarly to a prepaid credit card, although they do help build credit. The low credit limits and annual fees dissuade most people from making this choice, but it is a viable option for some people who need a credit card and are unable to qualify for any other offers.

Build Your Credit in Other Ways

Even if you cannot qualify for a credit card, you can still maintain your credit through other means as a safety precaution against future uncertainty. Have some of the utilities or other bills put into your name so that you'll build credit by paying them off. Although many of these do not report to credit bureaus they do provide a credit history for future services should you need to create you own account. This will prevent you from being completely without any credit history if you lose your spouse's support.

Although co-signing a loan can also help build your credit, bear in mind that you and your spouse or other co-signer are contractually obligated to pay off that money no matter what happens. If your spouse takes out a loan and you put your name on it as well, you may still be affected by the loan payments even if you are divorced down the line.

Consider Listing Your Profession as Consultant

One particularly sneaky way to get around the difficulty of qualifying for a credit card is to treat staying at home as a business. One woman circumvents the Credit Act by having household funds routinely deposited into her bank account as income and listing her profession as "consultant" on the application. This maneuver allows her to qualify for several credit cards.

Before choosing this option, be sure to review any possible ramifications it may have toward your taxes and ensure that it won't be considered fraud by the credit card company, which will make the situation worse if it's found out. In some cases, however, this is an elegant solution to the problem and allows you complete financial freedom.

At the end of the day, it's up to you to decide what the best method of controlling your finances will be. In the future, the act may change to allow non-working spouses greater flexibility in obtaining credit cards. Until then, you will need to discuss your options with your spouse and come up with the best scenario for yourself and your family.

If you're currently employed and considering quitting to stay at home, or if you're not yet married, now is the best time to get your own credit card. By qualifying early with your own income, you can have a credit card in your name even after you get married. This long-standing line of credit will improve your overall credit score and provide you with a financial back-up in case of emergencies.

The only person who has responsibility over your credit is you, so regardless of what you think banks “should” do it’s important to build a credit history independently. You never know when you will have to stand on your own two feet.

Alan Dunn is a serial entrepreneur and founder of HowtoSaveMoney.com, a website dedicated to helping people understand how to save and manage money in everyday life.