2013 Credit Law Boosted Secondary Earners, New Research Finds

History of Credit Access and State Property Laws

For years, lenders restricted credit access to low-earning partners in relationships. Prior to the 2013 policy change, secondary earners and stay-at-home parents—predominantly women—faced difficulties obtaining credit in 41 states because lenders were legally required to judge them on their own individual income rather than the larger pool of shared wages brought in by couples, Harvard Business School Assistant Professor Olivia Kim says. This dynamic left many borrowers unable to make important financial decisions independently.

The 2013 reversal of the Truth-in-Lending Act shifted that dynamic. Policymakers realized the previous framework was discriminatory because secondary earners and stay-at-home spouses remain predominantly women, Kim says. Originally envisioned to prevent predatory lenders from encouraging students to open credit cards using parental finances, the original law had unexpected consequences for others trying to establish credit.

Women have only been able to get credit cards of their own since 1974, when the Equal Credit Opportunity Act prohibited discrimination based on gender and barred lenders from requiring a woman to apply jointly with her husband. Previously, banks undervalued or disregarded earnings unless a woman provided documentation proving she could not have children. Even after 1974, state property law determined how lenders could treat a spouse’s income. Certain states classify family income as community property, while equitable distribution states treat income as belonging strictly to the individual who earned it.

Secondary Earners Spend More After Gaining Credit Access

Kim analyzed financial account data from the JPMorgan Chase Institute before and after the November 2013 law change. She focused on opposite-sex couples where secondary earners did not hold a sole credit card initially but opened one between October 2012 and December 2015. Comparing 66,200 couples across equitable-distribution states and community-property states, Kim tracked specific financial outcomes by 2015.

With greater access to credit, secondary earners spent more. Credit card limits for lower-income partners grew by about $1,500, and their share of consumption within households rose by 11 percent. Meanwhile, primary earners spent less, reducing the differences between spouses by half. Overall household consumption rose by $953 over the two years, or nearly $40 per month, with 75 percent of those funds spent on products and services benefiting the family as a whole.

Financial status showed stability over the same period. Households initially accrued higher credit card debt of about $115 during the first year and saved $87 less, but couples increased household income in the second year to balance the loss. Delinquency rates did not rise on average, nor did overdrafts or the use of high-interest loans such as payday loans.

Independent Credit Ownership Increases Individual Agency and Autonomy

Independent account ownership carries distinct effects beyond expanding total household credit access. Having a credit card in one’s own name and building an independent financial footprint increases individual agency and autonomy within the household, Kim says. Access to credit gives women facing divorce or abuse an easier way to start over, providing the necessary history for the job market, renting or buying a home.

As the Federal Reserve Bank of New York reports that card delinquencies remain high and US credit card debt reaches $1.26 trillion, financial institutions might grow reluctant to offer additional credit to lower-wage individuals. Yet, Kim observed no measurable jump in missed payments after these consumers received expanded credit access, even amidst rising household borrowing. Her advice to banks and marketers is to treat secondary earners as meaningful customers rather than overlooking their purchasing power.

Spouses should communicate when making key financial decisions to maximize access to credit markets, Kim says. Lower earners, regardless of employment status, benefit from maintaining independent credit to secure bargaining power if a marriage fails.