MONEY: Stay at home spouse should think outside the box

http://blogs.smartmoney.com/advice/2012/10/22/should-stay-at-home-spouses-get-their-own-credit-cards/?cid=djem_sm_dailyviews_t

OCT 22, 2012, 2:03 PM

Should Stay-at-Home Spouses Get Their Own Credit Cards?

By AnnaMaria Andriotis

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An effort to loosen credit-card standards for stay-at-home spouses would seem to benefit millions of consumers, but critics say the change could actually push some families deeper into debt and derail their finances.

Last week, the Consumer Financial Protection Bureau proposed loosening regulations to make it easier for the nation’s more than 16 million stay-at-home spouses to qualify for credit cards, largely undoing more stringent requirements put into place in October 2011. Prior to then, consumers could sign up for a credit card by stating their household income, even if all of that income came from their spouse. But the Credit Card Accountability Responsibility and Disclosure Act required the Federal Reserve to amend several lending provisions for credit card issuers, including a new rule that issuers had to ask for individual income on a credit card application, and could no longer rely on household income.

If enacted, the CFPB’s proposal would allow credit card issuers to ask card applicants 21 and over for income to which they have a “reasonable expectation of access,” which could include a spouse’s salary. The bureau says it’s aware of several issuers that have denied card applications from otherwise creditworthy individuals based on the applicant’s stated income.

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Not everyone agrees that this problem would outweigh the benefits. Some say the old rules were more fair for consumers. “Stay-at-home parents shouldn’t be penalized because they don’t personally bring in income,” says Scott Bilker, founder of DebtSmart.com.

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Having had a spouse pass, maybe I am a little sensitive to this issue.

I see this area fraught with issues over and above the very real and present danger that the couple may get into credit card debt.

The value of a two income family is that, if properly diversified by company (i.e., both spouses don’t work for the same big company) as well as by locale (i.e., dad works on Wall Street and mom works on Broad Street in a different sector), then that provides a lot of safety. As long as they “live” on one income, then they are relatively insulated when one of them loses their employment. (Notice I said “when”; not “if”!)

There is a HUGE danger when the two checks are not “independent”. Or, if they need both to “live”.

(Either of those cases are a much bigger problem than the risk being explored here!)

The stay at home spouse, for whatever reason, was deemed the “lesser of two evils”. Maybe, most likely, they earned less and the loss of income is substantively made up for by the lack of day care costs. Net of taxes, commuting, lunches, and “wear ‘n’ tear”, the couple decides to forgo some income, which when net of costs is considered, isn’t so bad.

From my pov, this has several risks to this approach.

Number One is that the stay at home spouse’s skills will “age” badly. For all intents and purposes, I’d guesstimate the spouse’s renetry rate at just the minimum burger flipper wage. “Everyone” can go to MickeyD’s?

Life insurance is a hidden expense in this equation. Having had a dependent spouse, much of my fiscal planning was around if I got hit with the proverbial Mack Truck, what does she do?

One, that I’ve seen but not experienced, is what happens if the stay at home spouse — male or female — gets divorced. The TV prototypical example is Doc X who gets married in med school; typically to a nurse. Becomes a big doc and has an affair with the sexy secretary. Stay at home spouse is <crude vernacular for the act of procreation>. The stay at home spouse is muchly at the mercy of the working spouse.

I’m not sure how you handle these things.

I’m sure the working spouse would be insulted at any suggestion that the stay at how spouse would be eft high and dry.

BUT!

Sorry, but it has to be considered.

Stay at home spouse BEFORE they agree to become the “wife” (boy or girl):

(1) Need life insurance that names them as the beneficiary and lock it in stone;

(2) Need a legal document that outline any promises or expectations (written by a pre-divorce lawyer); and

(3) Funds on deposit in the “stay at home” person’s name that can’t be touched. (Think Titanic’s lifeboat).

Too many people — gay or straight — married or living together — traditional or non-traditional — don’t think outside the box.

I write this not for the adults, but for the children who always seem to get the short end of the straw.

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