Can I get a credit card if I'm unemployed?
By Erica Sandberg
December 10, 2013
What do you think my chances are of getting credit cards if I'm unemployed? Do I need regular income at the time of application when I apply for a card? I want to get another card just in case, so I have something to live on in case finding a job takes a while. But do you think I'd get rejected if I've been unemployed for about a month? I have some savings. — Yvonne
One of the basic requirements for credit card acceptance is income. It can be your own or what you bring in as a household. That can mean a job held by a spouse or any other working person. Certainly it makes sense that an issuer would expect that you, as a potential customer, have the means to repay anything you're able to borrow.
The other major factor that the issuers would examine is credit history. If you're applying for a card in your name only, they'd consider your credit history alone. However, if you're going in on an account with someone and will have joint ownership, the issuer will take that person's reports and scores into consideration as well.
So what are the odds of you getting a card with no means of economic support? If your credit rating is excellent, it's possible that an issuer will take a chance on you. I wouldn't bet on it, though. Credit card issuers want to lend money, but also reduce the risk of loss. Without a job, you may be perceived as too much of a risk. Then again, if you list the amount you may be receiving in unemployment benefits as “income,” that may be sufficient, at least for a small credit line.
Interestingly, you'd think that with so much at stake, credit card issuers would take pains to make sure that applicants really are earning as much as they say they are. But in general, they don't. You write down what you earn, and that is basically that. If this sounds like an honor system to you, that would be true, except that there are ramifications for fudging the numbers. For example, if you lie on the application and say that you earn twice what you actually do, and then default on the balance, the issuer can sue you. If they identify the fraudulent income in the proceedings, you could be in big legal trouble.
You may have a better chance at a secured credit card. You'd put down some cash as collateral, and that gives the issuer greater confidence in you. In the event you walk away from your debt, the issuer can claim the money you put in the savings account as security. Although income is also a deciding factor for secured cards, the requirements may be loose enough for the odds of acceptance to be in your favor. Some “hybrid” secured cards (the Capital One Secured MasterCard, for example) will even give you a credit limit that's a little higher than the amount you put down.
If you're trying to build up your credit, you might consider one of these cards. But if your credit is already good and you already have a regular card, a secured card won't offer many advantages — and you'd be better off keeping your savings for an emergency. Plus, secured cards generally come with annual fees, which could chip away at the money you do have as you ride out this bout of unemployment.
Before you start looking into secured cards (or any type of credit card), I'd like you to stop and think about what you'll really use the card for. Never live on your credit cards. Without a way to make the payments, you'll get yourself into a load of debt. Each charge will add to the balance, which will also be increasing due to the finance fees. Miss a payment (or two or three), and your interest rate could soar, causing the fees to further mount.
Instead of relying on plastic to help you though the hard times, do everything possible to make ends meet on your own. Take any job you can find to bridge the gap, and refine your resume on off hours. Pare your expenses down to essential food, housing and transportation costs.
Credit cards are wonderful, but they will never take the place of a job, even on a temporary basis.
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