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You Charged What?! How to Avoid Family Fights Over Credit Cards

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Credit cards provide great convenience, but they can also create friction and escalate financial tensions within a family, especially at a time when the weak economy makes it important to cut back on spending and pay debts on time. To improve the odds of credit card harmony…

SEPARATE PERSONAL ITEMS

No two people ever completely agree about what’s worth buying, and seeing a month’s worth of a partner’s purchases detailed on a credit card statement can be the spark that sets off a financial fight.

Solution: Couples agree in advance about how much each partner is allowed to spend on discretionary purchases each month. These personal purchases should be made with individually held credit cards, not jointly held cards, so the other partner never sees the statement. As long as you remain within your discretionary budget, these charges may be none of your partner’s business.

Using separate accounts will also…

  • Decrease the odds of having to pay fees for going over your credit limit. It’s easy to incur these fees with jointly used accounts because partners often don’t know about each other’s purchases.
  • Increase the odds that at least one partner will maintain a high credit score.

HAVE A CARD FOR JOINT EXPENSES

Shared accounts are appropriate for shared household expenses — but couples first must agree on which expenses are shared and how much to budget for shared expenses…

  • Groceries usually are shared expenses — but what if one partner is happy with store brands and the other wants to eat premium foods?
  • Housewares usually are shared expenses — but what if one partner splurges on decorative items for the home that the other dislikes?

There’s no single right or wrong answer. Each couple must negotiate their own approach. For instance, partners can agree to take turns getting their preferences. They should discuss any possible purchases above what fits into their agreed monthly limit before putting those purchases on the joint card, if only to avoid surprises or over-the-limit fees.

If one partner has a low credit score (making it hard to obtain a joint card), that person can be added as an “authorized user” to a card account held by the partner with a higher credit score. Both partners will be issued cards for the account, but only the actual account holder’s credit score is considered… and only this person is legally responsible for payment. Authorized-user arrangements should be used only when joint cards are unobtainable. They can create feelings of inequality in the relationship.

HOLD MONTHLY MEETINGS

Schedule monthly household credit card meetings to…

  • Discuss large purchases you would like to make on the joint card.
  • Compare the interest rates being paid on the family’s cards if there is credit card debt. The highest-rate debt should be paid off first.
  • Determine together how much the card debt is costing the household. Seeing these potentially huge costs laid out can convince free-spending family members to change their ways.

Resource: The “credit card payment” calculator under the “Credit Cards” tab at Bankrate.com shows the high cost of making only minimum required card payments.

  • Confirm that the month’s credit card bills have been paid. Do not wait until the monthly meeting, however, to make payments.
  • Warn your partner if a credit card bill is going to be higher than normal, and explain why.

AVOID REWARDS CONFLICTS

For some credit card users, choices about how to cash in rewards points can lead to emotional disagreements. Discuss rewards points use with your partner before cashing in points — this way, one party won’t feel cheated by how the other uses points.

CARDS FOR COLLEGE KIDS

Students receive card offers almost as soon as they set foot on college campuses. Those with experience managing credit accounts are less likely to use cards irresponsibly.

Start your teen with a card that has limited financial downside, such as a credit card with a low credit limit… a “prepaid” or “secure” card that requires a deposit that is equal to the limit… or a debit card tied to the balance in a checking or savings account. Do not provide your child with an authorized-user card linked to one of your high-limit credit card accounts… or with a debit card linked to your bank account. You would be responsible for any purchases your child makes.

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Source: Howard S. Dvorkin, CPA, founder of Consolidated Credit Counseling Services, Inc., a nonprofit credit-counseling service based in Fort Lauderdale, Florida, and past president of the Association of Independent Consumer Credit Counseling Agencies. He is author of Credit Hell: How to Dig Out of Debt (Wiley). www.consolidatedcredit.org. Date: June 1, 2009 Publication: Bottom Line Personal
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