Editors’ Choice: Originally published February 14.
If you’re willing to hide a credit card and make big purchases your spouse doesn’t know, what other secrets are you willing to keep?
If you want a great way to erode the trust between you and your spouse, financial infidelity is a great way to do it. According to a survey by CreditCards.com, 12 million Americans have hidden a bank or credit card account from their spouse, partner or significant other. It’s not just youthful indiscretion, either: older baby boomers (11%), those aged 63-71, are nearly four times more likely than millennials to have had a secret account (3% ). There is a cost to maintaining this little shred of independence.
“Keeping secrets in your relationships is never a good idea,” said Matt Schulz, senior industry analyst at CreditCards.com. “Like any indiscretion, what starts small tends to add up. Spending $25 without consulting your partner may seem incidental, but when these purchases become more frequent or the amount increases, it can wreak havoc on your accounts and your budget.
Schulz was nice with this $25 example. It turns out that more than one in four (28%) respondents admitted to spending $500 or more without consulting their partner. Again, Baby Boomers (39%) are nearly twice as likely to spend this amount as Millennials (20%). And, no, your partner doesn’t agree with that. Only a third (33%) of respondents think it’s okay for their partner to spend $500 or more without asking. Men, Republicans and those with incomes over $75,000 were most likely to hold this position. Only 20% of Americans report spending even $25 or less without talking to their partner first. Parents (29%) are twice as likely to share this information as non-parents (15%).
If you don’t think all this clandestine spending is bad for relationships, your oft-checked credit card statement says otherwise. About 17 million US credit cardholders snoop on the spending habits of someone they share a credit card account with, according to a separate survey by CreditCards.com. In total, one in five cardholders admit to having viewed someone else’s credit card statements online (16%) or on paper (12%).
That’s down from June 2008, when 20% looked at printed account statements to see what someone else was spending, while 15% went online to play listeners. But just consider that 17% now say they feel closer to the other person because of the shared account — almost double the 9% who said this eight years ago. On the contrary, it only aggravates the violation of trust, since you share these accounts with your two relatives. Of those who share accounts, 48% do so with a partner or spouse and 10% are with an adult child. Only 5% are with children under 18. That’s a lot of spying among so-called adults.
All that spying led 19% of joint account holders to argue about those accounts during the recession and 12% still do so today.
“When you share an account with someone, it’s important to know what the other person is doing,” says Matt Schulz, senior industry analyst at CreditCards.com. “Ideally, you should talk frequently and openly with the other person, but if that’s not happening, checking on your fellow account holder’s spending can help you spot problems before they get out of control.”
When all these secret expenses go wrong, it cripples both the relationship and a couple’s finances. In the third quarter of 2016, according to the Federal Reserve Bank of New York, total US credit card debt reached $747 billion (up $33 billion from a year earlier). The Federal Reserve estimated total revolving debt at $981.3 billion in October, up 2.9% from a year earlier, despite interest rates dropping from an average of 12.22% to 12.51% during this period.
According to credit statistics and analytics site WalletHub, the average household with credit card debt now owes $7,941, just $523 less than what WalletHub considers unsustainable for a median household income of just under $52,000.
“It’s not about whether consumers are getting weaker financially, it’s about how long this trend of pre-recession habits will last and how badly it will go,” says research analyst Alina Comoreanu for Evolution Finance and WalletHub contributor. “Unfortunately, the nowcasts don’t look too bright.”
According to financial site NerdWallet, the average household with revolving credit card debt had a balance of $6,885 in June 2016 and was paying $1,292 in interest, assuming an annual percentage rate of 18.76%. However, households earning more than $157,479 a year pay almost four times more interest on their credit card than households earning less than $21,432.
Yes, high-income people have a lot more debt, but they are more able to pay it off. When a worker who earns $20,000 a year owes $3,611 in credit card debt, that represents 18% of his annual income. When a household earning $150,000 a year has credit card debt of $10,036, that’s less than 7% of their income. The self-employed are acutely aware of the seriousness of revolving credit card debt: Households headed by the self-employed spend $1,631 in credit card interest annually, while householders who work for someone others only pay $1,211 to finance their credit card debt. every year. Unfortunately, those who are in the most difficult situation because of credit card debt are the ones who depend on it the most.
“Going into debt to cover the gap between income and expenses is a short-term solution with costly long-term results,” says NerdWallet credit and banking expert Sean McQuay. “Instead of going into debt, try to increase your income by finding freelance or part-time work that you can do on the side, or cut expenses where you reasonably can, before increasing your mortgage balance. credit card.”
Also, just realize that money and love don’t always mix so well. Anthony D. Criscuolo, a certified financial planner with Palisades Hudson Financial Group in Fort Lauderdale, Fla., notes that merging a couple’s finances can be complicated if one or both partners have a lot of debt or past debts that were mismanaged. That said, since your credit reports are tied to your social security number, your partner doesn’t receive them or your credit history.
“Only debts and accounts that you open jointly will be tracked on both of your credit histories, and they’re always tracked as part of your separate credit histories,” says Criscuolo. “Joint accounts are simply reported to credit reporting agencies under any social security numbers that appear on the account. There is no such thing as a ‘joint’ credit score.”
Combining bank or credit card accounts can only complicate things. Julie Pukas, manager of US cards and merchant solutions at TD Bank, notes that one member of a couple can authorize the other to use their credit card. The upside is that a cardholder with bad credit can have a partner or spouse with good credit to help polish their credit score and look better in the eyes of the credit bureaus. However, there is a catch.
“The authorized user can check with the credit bureaus whether the card also reflects their own credit history,” Pukas explains. “Alternatively, it is important that the account owner ensures that the authorized user is responsible and does not damage the credit ratings of any parties.”
If there is a little more faith on the part of both spouses, they can become co-holders. They both need to make their payments on time, and the performance of the card is reflected on each of their credit reports. While this is great for budgeting and can help a couple rack up double the reward points they normally would, it does require some trust on both sides. If any of you just can’t get regular payments on time, that’s a problem.
“If either spouse has a history of financial irresponsibility, especially if this is primarily due to late payments and missed bills, the management of family finances by the financially responsible spouse can and will help raise the odds of irresponsible spouse’s lower credit,” Criscuolo said. “But it takes time.”
Pukas notes that a good rule of thumb is to only add your spouse to a credit card or open a joint account once established spending guidelines are in place. That way, when it comes time to pay your bills, there are no surprises.
While you may be able to work together on joint accounts, don’t just give up the cards you previously had for the sake of transparency. The length of your credit history makes up 15% of your score, making it a bad idea to close credit card accounts you’ve had for years. Keep them open, use them to make a payment or pay a bill you can easily pay every month, and put the card in the back of a drawer somewhere – or just destroy it. If the temptation is too great, just cancel the new cards instead of the old ones so you don’t lose your credit history.
Why does all this matter so much? Well, if you’re eventually going to buy a house together, bad credit can derail a loan or seal it with a huge interest rate. You can take out a loan in the name of a spouse with good credit, but that imbalance is going to carry over to auto loans, home equity loans, and the like. Before you tackle those big enough life decisions, have open discussions about credit early in the relationship and work out any issues before either or both of you start sneaking around with hidden credit cards or snooping around. in the statements.
“Credit history is just that – a story,” says Criscuolo. “It takes time to mend a bad story, but being married to someone who is financially responsible and will always pay bills on time will help both account holders’ credit ratings.”