Credit Cards for Unemployed

Joining the ranks of the unemployed – whether you saw it coming or the job loss came out the blue – seriously impacts most people’s financial situation. Even if you qualify to receive unemployment benefits (not everyone does) in most states this benefit pays out a level that is far lower than the income you just lost. So you might expect that getting a new credit card while you are without a job is impossible. That is actually not the case, but you do have to proceed with extreme caution.

Credit Cards and Employment

Most people know that approval for a credit card does not depend on your credit score alone. There are a number of factors taken into consideration and after the implementation of the Credit Act of 2009 one of the largest of those factors is a prospective card holder’s ability to pay off any credit card bills they might run up. Having an actual job lost a lot of its weight with credit card lenders, they now focus on your verifiable income and your debt to income ratio the most.

Therefore credit card companies want to know all about your verifiable source of income and yes, some will accept unemployment benefits as a verifiable source of income. If you have other sources of income (child support, alimony, investment income) your chances of being approved for a credit card even while unemployed are improved as well.

Some people would say that the last thing an unemployed person should be thinking about is getting a new credit card. There are however some reasons for doing so that are quite solid and sensible. One is to continue to build a credit profile if yours is rather sparse. Some employers actually add a credit check to the background checks they do before hiring someone so a few extra points on your credit score won’t hurt at all.

If your credit is good and you already have one or two credit cards you might want to look into getting a new, lower APR credit card so that you have more credit available to you on a couple of different cards to avoid maxing them out, something that will damage your credit score (actually having less than 50% of your credit line available to you at any given time damages your credit score).

If you are going to try to obtain a new credit card while unemployed research the various offers out there carefully and only apply for one or two. Every time you apply for new credit of any kind it slightly impacts credit in a negative manner, not something you want in your current circumstances.

Which Credit Cards Should You Apply for When Unemployed?

Every credit card company has a set of basic guidelines they follow in general for credit card approval but very few people on the “outside” really know what those are. If you know you have very good or excellent credit your chances of getting a new credit card while unemployed are still very good in many cases as long as you still have a steady stream of income like UI benefits or investment income.

If on the other hand you do not have very good credit in the first place you probably stand very little chance of being approved for a credit card even with UI benefits. You can consider applying for a secured credit card for which you are almost certain to be approved to build up that credit rating but do ensure that you can afford to pay anything you charge on it off right away.

As you might expect, there are scammers out there that are happy to try to take advantage of those who are unemployed and looking for a credit card. Often they will “guarantee” that they can get you a credit card if you pay them a fee or they will try to sell you on a “shopping card” that is only good for use on overpriced merchandise at a certain website. Therefore it is more important than ever that you research any credit card you are considering applying for very well before you do.

Managing Credit Cards While Unemployed

Whether your credit card is a new one that you have managed to obtain while unemployed or you have credit cards that you have held for a while the way you use them is probably going to have to change now that for the time being your income levels have changed.

It can be very tempting to use credit cards to pay bills etc to keep you afloat and keep a little cash in your pocket. While this may be a necessity in an emergency, it should be one of the last things you resort to. Carrying a balance on your credit cards, even the lower APR ones, costs you money every day after the grace period has passed (usually 25 -30 days from the charge on most credit cards) and will of course only throw you further into debt.

This having been said if you want to keep your credit score where it is – or build it up a little – you should continue to make some purchases – perhaps those you might otherwise pay in cash like gas or groceries – on your credit cards and pay them off at the end of the month. The continued activity will help you maintain your credit score and if you do happen to be one of those who does end up interviewing with an employer who does credit checks the fact that your credit has remained unscathed and you are still meeting as many of your financial obligations as possible might just impress them.