While the overall job market has improved over the past few years since the Great Recession, not everyone has been able to return to the workforce. At the same time, others are without employment because they are in school, transitioning to a new career, are stay-at-home parents, or have simply retired. In these situations, is it still possible to be approved for a credit card?
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First of all, a job is not required to be approved for a credit card, but applicants should be able to show some form of income. For several years, the Credit CARD Act of 2009 was interpreted to allow card issuers to consider only the applicant’s individual ability to repay a loan. This had the effect of shutting out many applicants, especially stay-at-home spouses. Fortunately, the Consumer Financial Protection Bureau revised its rules in 2013 to allow card issuers to consider the household income of applicants 21 years of age or older, so long as they had a reasonable expectation of access to the income they reported.
For example, an at-home parent could include his or her spouse or domestic partner’s income when their household finances were managed jointly. The same could also be true of extended family living together, or perhaps even roommates. However, the Credit CARD Act still requires applicants under 21 to show their own independent income, rather than rely on their parent’s income. In addition, credit card issuers can consider other forms of income other than employment including investments, child support and alimony payments.
How to Get a Credit Card Without a Job
Once they have included household income, as well as other forms of income that are not related to employment, most applicants with good credit should be able to qualify for at least a minimal line of credit. But in some situations, it’s possible that many card issuers may still be unwilling to grant a line of credit to some applicants. In these cases, it may help to apply for a secured credit card.
Secured credit cards require applicants to submit a refundable deposit first, before being granted a line of credit that is equal to the amount of the deposit. But at the same time, secured credit cards can be used much like any other credit card. Cardholders can use them to easily rent cars or reserve hotel rooms, which can be very difficult to do without a credit card. In addition, many secured credit cards even offer auto rental insurance, which can be expensive if purchased from the rental car agency.
Like all other credit card users, secured card holders must make monthly minimum payments, and will incur charges unless they pay their statement balances in full and on time. Most secured card issuers will report cardholders’ payments to the three major consumer credit bureaus, so these cards can help people to rebuild their damaged credit as well. In addition, secured credit cardholders are protected by the Fair Credit Billing Act, the same law that applies to standard credit cards. Unfortunately, secured cards will generally have higher annual fees and interest rates than a similar non-secured card. As you work to build your credit, it’s a good idea to keep an eye on your credit scores to track your progress. You can get your credit scores for free from several sources, including Credit.com.
Alternatives to Credit Cards
Prepaid debit cards are rapidly becoming popular among those who are not able to qualify for a credit card, as well as those who want to avoid the possibility of incurring debt. Prepaid cards differ from credit cards in that funds must first be added before the card can be used, so they are not a line of credit and have no significant qualifications for approval. On the other hand, prepaid debit cards typically have more fees (check carefully — a few have minimal fees) and less robust legal protections than standard credit cards.
Although many people do not have jobs, we can all have access to a secure and convenient method of payment. By examining the strengths and weaknesses of standard credit cards, secured cards and prepaid cards, you can choose the product that best meets your needs.
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This article originally appeared on Credit.com.
Jason Steele has been writing about credit cards and personal finance since 2008, poring through the terms and conditions of credit card agreements to understand the minutiae of how these products work. His work has appeared on Yahoo, MSN, HuffingtonPost and other major news outlets. In his free time, Jason's a commercial pilot. He graduated from the University of Delaware with a degree in History. More by Jason Steele