I was recently asked to weigh in (on a radio show) on a story that is developing in regards to new credit rules. A stay-at-home mom is angry because Target denied her a credit card. She is making a huge deal of this denial, and has started a petition at Change.org.
If you’ve read this blog before, then you know that I go to great lengths to stick up for stay-at-home moms. I think financial bullying of women continues to be a big problem in this country, whether it’s pay scales or corporate board appointments. However I refuse to give anyone a pass when it comes to violating basic laws of personal finance.
Per the CNNMoney article, the story goes like this:
After nearly five years managing her family’s finances, Holly McCall, a 34-year old stay-at-home mother of two from Vienna, Va., never thought she would have trouble getting a credit card.
She makes the majority of family purchases, has an excellent credit score and has been approved for several cards in the past. But when McCall applied for a Target card last fall, she was denied.
She blames that denial on a recent Card Act rule.
The law was passed in 2009 to protect consumers from unfair and deceptive credit card practices. But some stay-at-home parents argue that a Card Act rule that took effect last October has made it harder for them to get approved for credit cards.
Aiming to protect consumers from racking up too much debt, the Federal Reserve now requires credit card issuers to consider individual income from applicants instead of household income.
As a result, stay-at-home parents who rely mainly on their spouse’s income have a harder time getting approved for credit cards on their own.
“I think it’s demeaning — I don’t want to ask my husband’s permission for a credit card,” McCall said. “Just because I don’t get a direct paycheck for [my work], doesn’t mean it’s not worthwhile work that I’m doing.”
-Courtesy CNNMoney.com
There is so much failed logic in this viewpoint. To be fair, I’ve never spoken with Mrs. McCall. But fortunately her thoughts are pretty clear. However, this is not a gender issue. It’s not a class issue. It’s not a marriage issue. It’s not even the problem of the credit industry. This story is REALLY easy to understand. This story is about a person – without an income. That’s it. End of story. Why should a financial institution lend money to an individual that has no personal means to pay back the debt? There is a very easy solution to her problem, yet she has decided the solution is actually an insult. The solution is to get the credit card with her partner. Yes, the partner that brings home the income for the household. This doesn’t mean that her husband is a better, more valuable person. It simply means that he personally has an income. This isn’t offensive. It’s just fact.
She isn’t conceding her value by filling out a joint application for the credit card. She isn’t setting women back 50 years by asking for the person with income to promise to pay back the debt that they might incur. I’m a HUGE supporter of stay-at-home parents. My wife is currently staying home with our children. My mom stayed at home when I was a kid. But the valuation of the stay-at-home parent isn’t the issue here, yet Mrs. McCall wants you to think that’s the issue. Check out this quote from the article:
“I used to be CEO of a small software consulting business and am now staying at home to take care of a toddler and first grader. If you had to pay someone to do what I do now, it would cost you at least $120,000, which is a lot less than what I used to earn,” one stay-at-home mom wrote on the online petition. “BTW, it’s a 24×7, not a 40 hour per week job. Don’t you think I should be allowed to get a credit card on my own?!”
No, I don’t think that qualifies you to get a credit card. I know this seems hard to believe, but credit used to only be extended to people that personally had the financial means to cover the debt. A person with no income has no means to pay back the debt. This doesn’t mean the person isn’t necessary. It just means that the person doesn’t have income. I applaud the new credit card rules, just as I applaud the efforts of stay-at-home parents all over the world.
We can’t demonize lending institutions for protecting their assets. You can’t sign a petition asking an institution to loan money to people with no income. If someone is offended that an institution won’t lend them money based on a lack of income, then the person doesn’t understand how credit works and probably shouldn’t have a credit card in the first place.
And furthermore, how is a credit card a solution to their situation? Do they not have enough household income to cover their monthly bills? Do they just want to take advantage of discounts at the register? I’ll never know. But I have a hard time thinking that someone who’s fighting for the “right” to get a credit card from a private company, despite her lack of income, might not truly understand proper borrowing strategies. I’m not trying to be rude or mean. This isn’t a personal attack on her. I’m just further concerned about how we’ve been socialized in regards to credit. Being an American citizen doesn’t guarantee you the right to borrow money. Your creditworthiness is what gives you the privilege to borrow money.
We have got to stop borrowing when we don’t need to borrow. Borrowing is not the solution to all of our financial challenges. Yes, borrowing money for a car or house can make sense. But our escalating assertion that our borrowing rights are being violated by student loan interest rates, or the denial of credit to those of us without incomes, is only further separating us from reality. People are wronged everyday by the financial world. Yet many more people claim victimization when it’s just not there. Mrs. McCall is not a victim.
Peter Dunn a.k.a. Pete the Planner® is an award-winning financial mind and a former comedian. He’s a USA TODAY columnist, author of ten books, and is the host of the popular radio show and podcast, The Pete the Planner Show. Pete is considered one of the foremost experts on financial wellness in the world, but he’s just as likely to talk your ear off about bass fishing.
Thank you. So reasonable and logical! I’m a stay at home mom, and I agree with everything you just said!
By the way, Target offers a debit card option that has the same 5% discount that you get with the credit card. So, even if she just wants it to take advantage of discounts at the register, she could just get a debit card!
I completely agree Pete. The banks had a big time frame where they made lots of loans to people without the means for paying the debts (namely in the form of bad mortgages), and we now recognize that those actions were a major cause of our current economic situation. Now, a credit issuing institution tries to do the right thing by actually regulating credit distribution, and we fuss at them. You just can’t please everyone…
Yes! There was a time I probably would of thought it should be based on household income. But these days, too many people keep things from spouses so no, it doesn’t make sense to get credit without telling/needing your spouse but on it’s on “their dime” so to speak. I am stay at home for the moment and luckily I already have the credit in my name that I would want, but any new credit: we discuss. I would not and should not be offended that I would need him as a co-applicant at this moment.
Thanks Pete for a great post. I’m not a stay-at-home-mom but wish I were. My mom was and I remember her having some worry as she got older about being able to have some credit in her name alone. She didn’t feel victimized, she just looked at it as a possible concern in the future. And guess what? As the kids got older, she went back to work. Problem solved 🙂
Great perspective Pete.
While reading, I found myself wondering if Mrs. McCall would be equally supportive of a board or executive staff member taking out a line of credit against the income of the company she led without her knowledge!?!
Running a household is a joint affair requiring husband and wife get together on financial decisions or else.
Excellent article! To me, this lady epitomizes the lack of willingness to take responsibility for oneself and the obsession with blaming other people (particularly corporations) that is so pervasive in American society today. You hit the nail right on the head with this: “Yet many more people claim victimization when it’s just not there. Mrs. McCall is not a victim.”
From the article as part of the supporting reasoning for denying a stay at home mom a card… “It’s not a marriage issue”
It is most definitely a marriage issue. A marriage is a legal union. A union that binds to people together not only spiritually but finically.
It used to be that marriage created a situation where the wife was basically the property of the husband. To correct this situation over time the courts have extended finically rights to stay at homes, making both spouses equal.
This is a roll back of those rights.
Financially..not finically…sorry about that.
I would argue that the state of marriage today rolled back the rights. Divorce statistics have rolled back the rights that you mention. If Mrs. McCall were to get divorced, then her household income would immediately become $0. Financial institutions have finally taken this into consideration. I have seen countless divorcees over the years stuck with credit card bills that were previously supported by their household incomes. The common resolution to this sudden loss of household income is often bankruptcy. Unfortunately, no matter how intelligent and qualified the former stay-at-home parent is, reinserting oneself back into the workforce is a very challenging venture. The drawn out process that ensues is what leads to credit card default and eventually bankruptcy.
Love it. I’m definitely on the same page.