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Credit cards are all but a necessity in today's digital world, but finding a credit card for unemployed applicants can sometimes be a challenge. That's because card issuers are required to consider your ability to pay your debt before they issue you a card. This guide can help you determine if you still have qualified income and how to apply for a credit card while unemployed.
In the majority of cases, yes, unemployment funds count as income for your credit card application. In general, if the IRS counts it as income, so will the credit card issuers. Unemployment payments are taxed as income by the IRS. (Keep in mind that this applies to credit cards specifically; not all loan products count unemployment as income.)
Getting a credit card if you're unemployed is possible because most credit card companies care about income, not employment status. And many sources of income are acceptable in your credit card application. Basically, the law says that as long as you have a "reasonable expectation of access" to funds, they can be counted as income by the credit card company.
An important factor to note is that what qualifies as income varies depending on your age. If you're under 21, only your personal employment income, scholarships, and grants usually qualify. If you're over 21, the list is much longer and typically includes:
Funds gained from other types of debt, like debt consolidation loans, don't count as income. If you find a credit card for unemployed applicants and are unsure if an income source counts, contact the issuer to verify. Never lie about your income on a credit card application.
While you can find a credit card for unemployed applicants, that doesn't necessarily mean you should apply for it. If you're having trouble paying bills, for instance, adding on yet another bill may not be ideal.
Plus, carrying a balance on a credit card from month to month means credit card interest fees stack up pretty quickly. And if you fall behind on payments, you'll be hit with late payment fees and credit score damage.
On the other hand, sometimes credit cards can help without adding to the problem. For example, if your non-employment income only comes in once a month, but you need to make purchases in the meantime, a credit card for unemployed consumers could be useful.
The important thing is to make sure you can pay off the balance before the due date every month. If you're unsure whether you'll keep up with credit card payments, getting a card may not be a good decision. Only you can decide whether it's a good idea for you to get a credit card without income.
You can find a credit card for unemployed cardholders, but it's harder to find a credit card with no income requirement. Similar to getting a personal loan with no credit, you may be able to get help from someone else if you can't qualify for a card on your own. Generally, you have two options:
Both of these options have risks, particularly for the cosigner or primary account holder. Make sure you can pay off debt you accrue before asking someone to cosign your credit card or make you an authorized user on their account.
Although you can get a credit card for unemployed individuals, qualifying becomes a lot harder without good credit. If you still have income, but have bad credit, consider secured credit cards. You make a cash deposit to secure your credit line, but otherwise secured cards operate the same as any other credit card. A secured credit card for unemployed and bad credit applicants can help build credit over time as you create a record of on-time payments.
To recap: You can find a credit card for unemployed applicants, but you generally still need an income source to qualify. There are many qualifying income sources you can include, such as unemployment or Social Security payments. Getting a cosigner or becoming an authorized user may also be an option to get a credit card for unemployed consumers. Secured credit cards are another good choice for those struggling with bad credit.
If you have an outstanding credit card balance and suddenly find yourself without an income and unable to make payments, it's important to get in touch with the card issuer ASAP. You may qualify for forbearance (a pause on your payments) or another hardship program, but you have to reach out to check. One thing NOT to do is skip making payments, as this will tank your credit score -- you don't need that on top of being unemployed.
While you're required to report income on a credit card application, you don't have to report a decrease in income to a current credit issuer (especially if it won't impact your ability to keep making payments). If you do, yes, you could find yourself with a lower credit limit, especially if the decrease was drastic. As a general rule of thumb, it might be best to report increases in your income to your credit card issuer, and keep any decreases to yourself (again, as long as your lower income will not impact your ability to keep up with payments).
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