The Federal Reserve had the best of intentions. But in an attempt to protect college students, it hurt the financial independence of thousands of women.
In order to prevent college kids from digging themselves too deeply into debt, the Credit CARD Act of 2009 required credit card applicants to either make enough income to merit their credit limit or have a cosigner who would be legally liable for their debts.
A stay-at-home parent is considered as unworthy of credit as an unemployed college kid.
Earlier this year, the Fed ruled that credit card applications should ask about a consumer's individual income or salary rather than his or her "household income." This isn't just for students under 21, but for everyone. That means that a stay-at-home parent is considered as unworthy of credit as an unemployed college kid–-and seven out of eight stay-at-home parents are mothers. No one without a pay stub, no matter the value of her contribution to her household, can get a line of credit unless her spouse cosigns the account.
As far as I'm concerned, a stay-at-home mom works just as hard as (or harder than) her spouse-she just doesn't file her income with the IRS. She is also likely to make the household's financial decisions, from paying for groceries to saving for college to dealing with medical bills. So why is she relegated to second-class citizenship, a subordinate who can only get a credit card with her husband's say?
In response to criticism from women's rights advocates who believe that access to credit is a key tenet of financial independence, the Federal Reserve noted that the individual-income provision may be "inconvenient or impractical," but that such restrictions are necessary to prevent reckless lending and borrowing.
Others agree: CardHub.com CEO Odysseas Papadimitriou says, "This is Underwriting 101… you can only lend to people who can afford to pay it back." His suggestion is for a nonworking spouse to sign up for a joint credit card with her spouse, which allows the nonworking spouse to build her credit score despite not having an income. But what good will a credit score do if you're automatically disqualified?
I can't overstate the psychological effect of relying completely on a spouse for such an essential part of adult finances. Refusing credit completely devalues a stay-at-home parent's contribution, essentially saying that the household's income belongs solely to the wage-earner.
In addition to contributing to the psychological shame of being an unequal partner in a relationship, this also renders stay-at-home parents financially vulnerable in the case of divorce. If a stay-at-home mom's spouse is irresponsible, her credit score will fall-and she can't repair it without her own line of credit.
The most dire implications are for women trapped in abusive relationships. If a woman can't get a line of credit without her husband's approval, she is less able to leave a failing relationship. According to Rene Renick of the National Network to End Domestic Violence, a joint line of credit opens an abused woman to even greater exploitation. Financial abuse is one of the least recognized but most significant ways that a batterer controls his victim: Not only can an abusive partner use the money irresponsibly and ruin the victim's ability to get credit later, but he can use the account to track her if she tries to leave.
"Financial abuse occurs in 98% of abusive relationships. I can't tell you the number of women who've said, ‘I stayed in the relationship longer than I wanted, or came back, [because] I was afraid I wouldn't be able to feed my kids,'" says Renick. "[The Fed's regulations] will limit a woman's ability to have access to assets on her own. Batterers will more than likely use this to … keep her entrapped in the relationship."A Household's Income Is More Than A Salary
When one spouse works outside the home and the other inside, the stay-at-home spouse makes an invaluable monetary contribution to the household, not least because the employed spouse wouldn't be able to focus on work and earn as much without her. She makes crucial financial decisions without thinking that she's spending "her husband's money." A well-functioning partnership recognizes that a household's income is just that-it belongs to the household. A stay-at-home mother should not be punished because of the sphere in which she works.