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Being unemployed doesn’t automatically disqualify you from getting a credit card. Credit card issuers are more interested in your income than your job. They also look at your credit history, credit scores and existing debt.
You can meet the income requirement even without a job by including on your application any income you have access to. Even if your income comes up short, rest easy. You still have options to build or maintain credit.
Listing income on your application
Think about the income you're relying on to get by while you're unemployed. If you're over 21, the Credit Card Act of 2009 allows you to list any household income to which you have a "reasonable expectation of access." This includes income from your spouse or partner as well as sources of nonwage income such as investment returns or Social Security payments. If you've lost your job, you can include unemployment benefits on your application.
The Credit Card Act of 2009 allows you to list any household income to which you have a 'reasonable expectation of access.'”
Getting approved for a credit card depends on your income, your credit history and your debt-to-income ratio, which is your current debt payments as a percentage of your income. If you're approved, your credit limit will depend on your income and debt-to-income ratio.
The Credit Card Act requires lenders to consider your ability to make your payments when you apply for a credit card. That’s why some of them also look into your payment obligations such as your rent or mortgage, alimony or debts.
How COVID-19 is affecting credit card customers
When your income isn’t enough
If you don't have enough income to qualify for a credit card on your own, you're still not shut out completely. Here are three options:
1. Apply for a secured credit card
Secured cards require a security deposit as collateral in case you don't pay your bill. The amount you deposit determines your credit limit. Because of the deposit, it's generally easier to qualify for a secured card than a regular, unsecured card, and the income requirements may be less stringent. You get your deposit back when you close the account or upgrade to a regular credit card.
2. Recruit a co-signer with a good credit score and steady income
It's rare these days, but some credit card issuers allow a co-signer — a friend or family member who agrees to make payments when you can’t. You will still be responsible for the payments; the co-signer is simply a fallback. This is a big favor to ask of someone. You’ll want to keep up with payments to avoid jeopardizing your co-signer's credit score and yours.
3. Become an authorized user on someone’s credit card
A friend or family member can make you an authorized user on their account. You’ll get a card with your name on it that’s linked to their account. They will be responsible for making the payments. You can work out an agreement with them to decide on a spending limit and payment plan. Stick to the plan to avoid hurting the primary cardholder’s credit score. You're now tied to their credit score, so it could affect you, too. Some card issuers report an authorized user's credit activity to credit bureaus.
Nerd tip: In recent years, several so-called "alternative credit cards" have come to market, advertising nontraditional underwriting policies to assess creditworthiness (aside from evaluating FICO scores alone). While these cards may be good options for those with limited or no credit, you'll still have to meet income requirements, as you would with traditional credit card issuers.
You can get a credit card while unemployed, but is it a good idea?
It depends on your personal situation.
If you’re seeking access to credit merely in order to cover essential expenses, proceed with caution. Credit card debt is notoriously expensive. If you have money in savings you can tap or a loved one willing to give you a loan until you get a new job, those may be better options.
But if you’re applying for a credit card in order to build your credit, and you have access to funds to pay it off each month, it may make sense for you. Here are some kinds of cards you may want to consider first:
A credit card with a 0% introductory APR: Many cards offer 12 to 18 months of interest-free swiping, though you’ll probably need at least good credit to qualify (typically FICO scores of 690 or higher). Keep in mind that you still need to make at least the minimum monthly payment. True 0% APR offers, by the way, are different from deferred interest offers, in which retroactive interest is charged if you don’t pay off the balance before your 0% rate expires.
A credit card with a low ongoing interest rate: If you have fair/average credit (FICO scores of at least 630) — or you have good credit but it will take you longer than the typical 0% APR period to pay off your debt — a card with a low interest rate all the time might be a good option. “Low interest” credit cards are still expensive compared with other forms of credit, but they could help you save money compared with a traditional high-interest card.
Carrying a credit card balance isn’t ideal, especially when you don’t have steady income. But if you need one to pay for essentials, explore low-interest options and make sure you can pay at least the minimum monthly payment until you find a new job.
Unemployment doesn't have to be a barrier to credit card approval if you have good credit and a source of income you can use to pay the bills. But whether you're unemployed or you have a job, use your credit card wisely. Don't charge more than you can afford, and aim to pay your bill in full every month to avoid interest. If that's not realistic given your employment situation, resolve to pay off your balance as soon as you get back on your feet.