A federal rule kicked in Saturday that will prevent many applicants from qualifying for new credit card accounts.
The Federal Reserve's rule told credit card companies that they no longer can consider household income when assessing the creditworthiness of an individual who applies for his or her own card. Under the rule, only an individual's own salary or other income -- rather than combined household income -- can be considered.
One major effect of the new regulation: Stay-at-home moms (or dads) without significant outside income no longer will be able to open their own credit card accounts -- and establish their own credit histories to build their credit scores. Compliance with the rule became mandatory Oct. 1, 2011.
"From an economic standpoint, this is a whopper," said Manisha Thakor, founder of the Women's Financial Literacy Initiative, a financial fellow at Wellesley College and a Houston-based financial analyst. "Not only will be harder to build a credit score, but this ruling is tantamount to assigning a zero dollar value to the work stay-at-home parents do day in and day out to keep households running."
...Previously, an individual member of a household could qualify for a credit card account by pointing to the combined income of several members of that household. For instance, in the case of a married couple, a stay-at-home wife without any independent income could qualify for and obtain a credit card under only her own name -- and establish her own credit history -- by pointing to the salary of her husband.
That no longer will be the case. Now, she must prove that she can make the payments with only her own resources, a nearly impossible hurdle for many homemakers to overcome.
"They're going to be stuck, really stuck," said Barbara Shapiro, a Boston-area registered investment adviser, vice president of the HMS Financial Group and a certified divorce financial analyst. "It makes these people completely unable to buy an airline ticket, rent a car or do anything that requires a credit card.
"We're becoming a cashless society," Shapiro said. "What are these people supposed to do?"
Maybe they can survive on hope, change, pink ponies and unicorn dreams.
Hat tip: Laughing Conservative.