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The Federal Reserve’s Salvo in the War on Women

April 17, 2012
Personal Finance
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It’s one thing to say that a college kid might not contribute to a family’s income. It’s quite another to deny a homemaker’s role to the household – but that’s exactly what the Federal Reserve did, issuing a policy that marginalizes stay-at-home mothers and puts abuse victims at risk.

Homemakers must ask for permission to get credit cards

The Credit CARD Act of 2009 wanted to prevent students from using their parents’ incomes to get high credit limits, even though their parents were not liable for the debt. So it required that applicants state their individual income, not the household income. It was assumed that the law would apply only to those under 21, on the theory that students aren’t household decision-makers.

But the Federal Reserve didn’t leave well enough alone. They said that the law applied to everyone, no matter their age: if you don’t get a W-2, you don’t get a credit card. Homemakers – who are 30 times more likely to be women – must now ask their spouse’s permission to get a credit card.

So quietly does the war on women enter the financial sphere.

One comment from Bernanke sends women back to the kitchen

It’s demeaning for a woman to ask permission for a line of credit, even if she handles the banking, grocery shopping and bills for the family. Even in the most well-functioning household, such an inequity forces a woman into a submissive role. But the Federal Reserve did more than emotional damage.

Stay-at-home mothers are unable to build up a credit score, raising barriers to getting loans, apartments or even jobs if they ever divorce or try to gain some financial independence.

The Fed’s decision reflects the attitude that stay-at-home parents’ value and contributions have nothing to do with money. A college student can reasonably be considered a dependent. But to prohibit a parent from making financial decisions is to turn her from an equal to a supplicant. The message is clear: The only person who can be trusted with the family’s finances is the one whose name is on the paycheck.

For homemakers, humiliating; for abuse victims, crippling

Financial abuse occurs in 98% of violent relationships, and the provision adds one more tool to an abuser’s arsenal. Since a homemaker can only get a credit card if her partner’s name is on the account, abusers can:

  • Ruin her credit by missing payments and defaulting on loans – a not-uncommon occurrence;
  • Extend his control by refusing to allow her to get a credit card; and
  • Track her down if she tries to leave, and later uses a credit card on a joint account.

What does the Federal Reserve say?

This new development “could be inconvenient or impractical…such as when a consumer’s spouse is not available to apply in a retail setting.”

Or if she finds herself newly divorced and in need of an apartment. Or if she’s terrified of her partner, who ruined her credit by running up debts. Or if she simply wants to assert that she is an equal partner in the relationship, and makes a significant financial contribution. Yes, the provision is indeed inconvenient.

How to stay financially independent while staying at home

Even without an income, a stay-at-home parent can take steps to ensure her financial independence. From building a credit score to keeping a savings account, a homemaker can take the following steps:

  1. Open and maintain savings account. Separate from any bank account you may hold with your spouse, open and add to an account that’s solely in your name. This can protect you if something that you don’t want to think about happens.
  2. Open a joint line of credit with your partner, if you can trust him or her. Making your payments with a co-signed loan will build your credit score, even if another person’s name is also on the loan.
  3. Get a secured credit card, if taking joint loan. Secured cards often come with annual fees, and you’ll need at least $200 to post as collateral. However, these products do improve your credit score with responsible use.
  4. Contact a credit union. Community development credit unions, in particular, reach out to those with little or no credit. North Carolina’s State Employees Credit Union offers a credit-building loan with only 12% interest, and the new Borrow and Save pilot program aims to offer alternatives to predatory lenders.
  5. Find a credit-building nonprofit. The Credit Builders Alliance’s member nonprofits find innovative ways to build credit, such as the Mission Asset Fund in our very own San Francisco. There, borrowers pool their funds, and each participant takes a turn to borrow the balance.

The Fed may have told stay-at-home moms that they don’t contribute. They may have raised a barrier to financial independence. But just because the law tells women that they’re second-class, it doesn’t mean we have to listen.