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.”
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.