Getting a Credit Card for a Person on Unemployment Insurance

Losing your job is rarely (if ever) a pleasant experience and it certainly has a major impact on your finances. If you are eligible to receive it, unemployment insurance is a help but it is usually an amount that is considerably less than you were earning while employed. To some getting a new credit card may be a strange thing to be considering if you are currently receiving unemployment insurance but the question of whether or not someone on UI can get a new credit card at all is one that comes up often.

Understanding UI

Some people (usually those who have yet to ever have to claim it) do not really understand how unemployment insurance and UI payments actually work. Unemployment insurance is just that, insurance, and everyone who works in US pays into the fund from the day they begin working until the day they retire. Therefore UI is not, as some people very mistakenly believe a government handout or benefit but merely the payout on an insurance policy, much as the same as a payout on any other kind of insurance policy – just perhaps not as lucrative.

There is also a limit to the amount of time you will receive unemployment insurance, which although it has been extended in many states recently in response to the high level of unemployment is still just for 26 weeks in most states unless you meet a certain criteria that might qualify you for extended benefits.

Unemployment Insurance and Credit Card Companies

Credit card approval is determined by a number of different factors but your credit score and verifiable income are certainly two of the biggest factors. Unemployment insurance is verifiable income and some credit card companies may consider it applicable but getting a ‘traditional” kind of new credit card if you are unemployed is not going to be easy. The first problem is of course that credit card companies know that your UI benefits will end after a certain period of time and if you have not gained employment by then you may not be able to pay any outstanding credit card bills, making you a higher risk than others, even if you have a good credit score. However every lender has a different criteria so to say that every credit card company would reject you out of hand would be inaccurate.

Reasons to Get a Credit Card while on Unemployment Insurance

There are some circumstances under which trying to get a new credit card while still job hunting and receiving unemployment insurance makes sense. For example if your credit rating is good – and your credit rating does not immediately drop just because you are temporarily between jobs – you may want to look for a lower APR credit card if you have balances on a card with a higher APR. You may also want to add another credit card to your wallet in addition to the one you have so that you do not max the existing card out, as that will lower your credit score.

What Not to Do on a Credit Card Application when Unemployed

It may be very tempting, especially if you have only just lost your job, to lie on a credit card application and still use the information about your former employment and income to qualify for a new credit card, in the hope that the lender does not actually check too closely. You may actually get away with it but by lying on your credit application you will actually be committing fraud and the problems that might cause if you are found out really do not bear thinking about…

Credit Card Use Best Practices while on Unemployment Insurance Benefits

Running up large balances when you are on UI is not a good idea. In order to protect your credit rating you do not really want to stop using credit cards you already have altogether and they can certainly be useful for covering expenses until your next UI check arrives. It is worth remembering that your current situation is only a temporary one so that protecting – and even building – your credit rating while unemployed is the most important consideration.

Credit Cards to Consider Applying For

If you are unemployed applying for a higher limit or perk laden credit card and expecting to be approved, even if you have a great credit rating is unrealistic unless you have several other sources of verifiable income you can offer up such as court ordered child support or investment income of some kind.

Instead you should focus on the more basic credit card offerings, especially since rewards credit cards tend to come with higher APR rates. Capital One offer a number of credit cards that are designed for fair credit and that lowered requirement may mean that they will grant you a credit card but as each person, their debt to income ratio and their personal situation is unique there is no guarantee of that.