The War on Women: Why Stay-at-Home Moms Need Permission to Get Credit

Anisha Sekar

Recent events may have brought the debate over homemakers' contributions back into the spotlight, but last month marked the one-year anniversary of a major -- if unnoticed -- salvo in the war on stay-at-home parents. Last year, the Federal Reserve declared that credit card applicants must use their individual income on the application, not their household's. This seemingly innocuous pronouncement has resounding implications: homemakers cannot get a credit card without the breadwinners' permission.

Statement implies that homemakers do not contribute to income

The Fed put out its statement to clarify a provision of the Credit CARD Act of 2009, which sought to protect college students from getting too-high credit limits and digging themselves into debt. When the CARD Act was passed, students could apply for a line of credit and list their parents' incomes as their own, thereby getting inappropriately high limits. The law intended to prevent students from borrowing against an income they did not earn.

As a remedy, the legislation required those under 21 to either list their own income -- which, for most students, is too small to get a credit card -- or enlist a co-signer, who is legally responsible for the debt.

All of this is innocuous enough. But in March 2011, the Federal Reserve declared that the provision would apply to all people, be they dependents or equal partners in a household. No paycheck, said the Fed, no credit card. The implication was clear: A homemaker does not contribute to her partner's income.

From partner to supplicant

As a result of the CARD Act, a stay-at-home parent must ask for her partner's permission to get a credit card. A homemaker may make most of the household's financial decisions, from paying the bills to buying groceries. But she -- and by a 30 to 1 margin, it's a she -- is barred from taking out a line of credit based on income that, it cannot be doubted, she had a hand in earning.

The crime of a stay-at-home parent is that her contribution to the family's finances cannot be quantified. It's reasonable to say that a college student might not contribute to a family's finances, or at the very least, is not part of the major decision-making team. But on the other hand, a homemaker's work raises the household income, and she has as much say in the household's money as the employed spouse.

And the homemaker's contribution to the household income is entirely ignored. If she were taken out of the equation, her partner would have to work harder to earn the same amount of money. And yet, because her impact isn't listed in a form that the IRS would recognize, her partner claims her labors as well as his own.

Even in the most equitable, well-functioning household, having to ask for access to money creates a moment of awkwardness, a brushing-off of meaning, a need to reassure that this doesn't mean anything. But in less-pleasant households, the situation is far worse.

The CARD Act and domestic violence

Research shows that approximately 98 percent of all abusive relationships include some form of financial abuse -- withholding money, misusing money, keeping a partner from earning money. And money is a major reason that domestic violence victims remain with their abusers, who they perceive as the only way to feed themselves or their children. An abuser can already keep his partner from working. Barring her from access to credit just adds one more tool to his arsenal.

Under the CARD Act, a victim of domestic violence has two choices: Get by without credit, which not only puts a strain on her financial freedom but can keep her from getting a loan, an apartment or even a job if she tries to leave; or take out a joint loan with her abuser, inviting the not-uncommon scenario that her abuser will miss payments, ruin her credit score, and run up debts in her name.

Non-working domestic violence victims are thrust into a bad situation: cut off from credit, even if it might save them.

Federal Reserve: Provision is "Inconvenient or impractical"

What is the Federal Reserve's response to disavowing the contribution of homemakers, and to the harsh reality of financial abuse?

This new development "could be inconvenient or impractical?such as when a consumer's spouse is not available to apply in a retail setting."

True, one consequence of the law is that stay-at-home parents will not be able to apply for a card at Macy's on their own; and true, that in itself can be a humiliation. But for victims of financial abuse, the law's impact is far greater. They may be cut off from credit altogether, or their abusers may ruin their credit and leave mountains of debt in their names. They may find leaving that much harder.

Now, politicians and pundits once again take up the debate of the stay-at-home parent's contribution. But it bears remembering that, one year ago, the Federal Reserve firmly declared its position -- with real consequences for homemakers.

What can homemakers do?

A homemaker should make sure to keep some of her financial independence. Safety and practical concerns aside, having control of your own money asserts that you are a capable, decision-making family member, not a supplicant dependent on her spouse's money. Here are a few ways to build credit and savings, even without an income:

Have your own savings account. Even if you have a joint bank account with your spouse, keep another account solely in your name. Build up your savings there as a personal rainy day fund.

Take out a joint loan with your partner, if you can trust him or her. That way, on-time payments will reflect positively on both of your scores.

Consider a secured credit card, if you don't have any credit and can't take out a joint loan. Secured or pre-approved cards often come with annual fees, and you need to post a security deposit that's usually at least $200. However, you're more or less guaranteed to qualify, and you can use a secured card to move onto unsecured ones.

Contact a nonprofit, if worst comes to worst. A number of nonprofits try innovative strategies to build credit, such as the Four Bands Community Fund. They help Cheyenne River Indian Reservation residents rebuild their credit with microloans and provide personal finance counseling.

Anisha Sekar is the VP of Credit and Debit Products at NerdWallet, and recently wrote about women and the CARD Act on the NerdWallet blog.