Credit Card Solution

If you’ve ever applied for a credit card, there’s a good chance you’ve seen the “household income” section on the application form.

And when you came across it, you may have wondered how to fill it in. If you were a kid, you may have added your parents income to your non-existent income.

Or perhaps you combined the income of your roommate(s) or spouse. And while doing so may have seemed fairly innocuous, those people wouldn’t really be on the hook if you were unable to make your minimum credit card payment.

The reality is that only those who co-signed would be accountable if you were unable to make a payment, or worse yet, missed a payment.

And so credit card issuers will now have to consider a card holder’s ability to repay, not the household’s, per Federal Reserve rules tied to the recently enacted CARD Act.

The Fed felt the term “household income” was too vague, and simply didn’t allow credit card issuers to properly evaluate an applicant’s ability to repay their debts.

So in order to protect consumers from taking on unaffordable levels of credit card debt, the Credit Card Act will require that before opening a new credit card account or increasing a credit limit on an existing account, card issuers will have to consider an individual’s income/salary.

Of course, this doesn’t necessarily mean they’ll be asking for income documentation. It just means it’ll possibly be tougher to get approved for a credit card.

And credit limits will likely be a little more down to earth…

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