A proposed change to existing credit card lending requirements has led to a heated debate among financial advocates in California and elsewhere. Since October 2011, individuals who apply for new credit cards must list their personal income on the application. Previously, applicants could list household income, which allowed spouses who do not work outside of the home to have credit in their own name. The change was implemented to address rising levels of credit card debt.

However, the result of the change has left as many as 16 million stay-at-home spouses with limited access to credit cards. This leaves them unable to use credit to manage household finances, and they are also unable to build a credit record in their own name. On the other hand, some say that open access to credit can lead to situations in which the non-working spouse racks up large balances and threatens the financial stability of the family.

A recent proposal by the Consumer Financial Protection Bureau has suggested loosening the 2011 restrictions to once again allow household members to list any household income to which they have “reasonable expectation of access.” This would allow stay-at-home spouses to once again obtain credit in their own name. It would also let them to bolster their own credit scores through the responsible use of credit cards.

Many California families who are struggling financially will attempt to control their debt by transferring credit card balances to lower-interest cards. The proposed changes could help aid that process for some, but in many cases such attempts will not be sufficient to solve heavy loads of credit card debt. When debt loads are significantly higher than income levels, the best path to financial stability could be a personal bankruptcy filing. Such an action can not only discharge a large volume of consumer debt; it also stops aggressive collections efforts.

Source: Market Watch, “Should stay-at-home spouses get their own credit cards?” AnnaMaria Andriotis, Oct. 22, 2012