Sharing a credit card with a spouse, partner or child? Be prepared for arguments and snooping. Joint credit card accounts put additional strain on some relationships, according to a new CreditCards.com poll.
|"Taking Charge" survey: Part 3 of 3
- Part 1: Nearly 3 out of 4 Americans agree the government should regulate credit cards and 82 percent say the cards are essential to their lives.
- Part 2: How credit cards are changing the way Americans live.
- Part 3: Credit cards can be a source of anxiety and tension when couples share accounts.
Nearly half of people with credit cards surveyed in the second annual CreditCards.com "Taking Charge" poll say they have shared accounts with a spouse, partner or their children, but credit counselors and financial advisers say sharing credit can be rife with problems.
"There is a lot of trepidation about joint credit -- and for good reason," says Paula Boyer Kennedy, a certified financial planner, author and investment consultant. "When you sign up for credit with anyone, whether it's a spouse or your children, you're lending your good name to those other people. It can do a lot of damage if used incorrectly."
The telephone poll, conducted June 4-26, 2008, by GfK Roper Public Affairs, found nearly one in five people (19 percent) who have shared credit card accounts with others report the shared account has been a source of arguments. And 7 percent of those shared account holders have canceled credit cards because it caused conflict in their relationships.
"Taking Charge" is a yearly CreditCards.com snapshot of public opinion on Americans' use of, spending habits, management and understanding of credit cards. The poll randomly called 1,001 adults. The margin of error is plus or minus 3 percentage points for the full sample. (See poll methodology.)
The poll also found:
- About half (51 percent) of credit cardholders have ever shared an account with someone else, mostly with a spouse or partner.
- Of those who report sharing a credit card, nine out of 10 (91 percent) have shared an account with a spouse or partner. About one-fifth (21 percent) have shared an account with a child or adult child.
- Nearly one in five (20 percent) said they have used printed shared credit card account statements to check up on the other person's spending and 15 percent said they used online account statements to check up on the other person.
- Nearly one in five (17 percent) said they were concerned that their own credit score would be negatively affected by the other person's use of the account.
- However, nearly one in 10 people with shared accounts say they felt closer to their partner or child or at least more in control of the relationship when they shared the account. There was no significant difference between those sharing accounts with spouses or partners and those sharing accounts with children.
Share and share alike
Shared credit card accounts can take one of two forms: an authorized user, such as a child, can use a credit card issued to an account holder who is responsible for paying the bill; or a joint account, where two people such as a married couple use one credit card account, but are each responsible for making payments.
Both types of accounts can cause relationship ripples. An authorized user may overspend and leave the account holder stuck with an unexpectedly large bill. A joint account holder can charge up a large amount and stick the other user with the payments. In either case, failure to pay the bill can tarnish both users' credit reports -- no matter who made the purchases.
There is a lot of trepidation about joint credit -- and for good reason.
|-- Paula Boyer Kennedy
certified financial planner, author and consultant
Sharing accounts can be beneficial, especially for people who have not established a credit history of their own or who have bad credit (See piggybacking), but the practice can cause relationship problems for both parties.
These days, the stakes are higher and penalties greater when it comes to managing credit card accounts. One misstep on a credit card account can put you in the stratosphere of interest rates and trigger a host of fees. Some consumers have had interest rates hiked for no apparent reason. Congress and federal regulators are considering proposed laws and rules to strengthen consumer protection in credit card deals -- including limiting interest rate hikes -- but those measures, if approved, could take months or years to implement.
Experts say the decision to share a credit card account may hinge on how much a user trusts the other person to act responsibly given the fact that it could take years to dig out of the debt caused by irresponsible credit card account management.
Trust no one?
Credit card terms have become so dicey, experts say, that it's risky to trust another person with access to your account. "One slip-up and your credit is hit," says Andrew Bernstein, a senior certified credit counselor at Credit Card Management Services in West Palm Beach, Fla. "It's just not worth it."
"I always say 'In God we trust, but that's it.' Nobody else. It's never a good idea to share any kind of account," says Rich Aguirre, a veteran consumer credit counselor at the Phoenix-based Take Charge America nonprofit counseling agency.
I always say 'In God we trust, but that's it.' Nobody else.
|-- Rich Aguirre
credit counselor, Take Charge America
Aguirre and other credit counselors say the majority of problems with shared accounts arise when there is a divorce or when dating couples mingle their finances. A divorce court may order the husband and wife to split the joint credit card bills and each pay a portion, but if one fails to meet his or her obligations, the other is still liable for the debt. Debt collectors don't pay attention to divorce decrees.
"It happens a lot," Aguirre says. "The wife takes her portion of the accounts and she'll go ahead and pay those. Then she comes back and says, 'My husband didn't pay his and now they're coming after me.' The credit card company doesn't care what the court says; they want their money."
Bernstein cautions couples about "revenge spending" -- when a jilted lover who is also a joint account user goes on a spending spree, racking up credit card debt as revenge for ending the relationship. "You want to do everything to keep your credit in good standing. That's one surefire way that it might not stay good."
"Statistically, the possibility of a marriage failing is pretty strong," says Howard Dvorkin, founder of Florida-based Consolidated Credit Counseling Services Inc., a nonprofit credit counseling agency. "You have to pull the romance out of finances."
Dvorkin relates the story of one of his first clients, a single woman who sought his help in paying off $56,000 in credit card debt. The woman allowed her musician boyfriend to use her credit card to take his band on the road. "When it came down to him paying it back, he dumped her," Dvorkin says. "Not only was there an emotional attachment, but a financial attachment."
Dvorkin believes couples -- whether married or not -- should keep separate credit card accounts. He adds: "Your credit is your credit and you shouldn't let anybody near what you have worked so hard to build. Give 'em your heart, but don't give 'em your checkbook or your credit card."
Just say 'No'
Is there ever a good time to share credit cards? Aguirre, the long-time credit counselor, doesn't think so.
"You have to be responsible and say 'no,' not only to protect yourself but to make that other person be responsible," says Aguirre, who says he has seen a host of problems over the years arising out of sharing credit and credit cards.
Co-signing -- the personal loan equivalent of a joint credit card account -- is also problematic, Aguirre says. "The best advice I can give is don't co-sign -- unless you can afford to make the payment and it doesn't affect your lifestyle."
Kennedy, the financial planner, says couples should talk about all aspects of financial matters early in their relationships: "Before you commit to a relationship, before you live together, before you get married, you need to talk about this stuff and a lot of couples don't. Who is going to pay for what? What's our general approach toward money? Where are we similar and where are we different? How much are we going to save?"
She adds: "It will eliminate an enormous amount of the stress."
Wrong cards roil relationships
In addition, the poll shows the value of finding a credit card that matches your needs. People were asked to agree or disagree with the statement, "I am confident that I have the credit card that's best for me." Compared to people who express satisfaction, people who sense a misfit between themselves and their credit card are:
- Twice as likely to have argued with their spouse, partner or child about their shared account (31 percent versus 16 percent).
- Twice as likely to have printed account statements to monitor the spending habits of a spouse, partner, child or adult child (34 percent versus 18 percent).
- Three times as likely to worry that their own credit rating will be adversely affected by their partner's credit habits (37 percent versus 12 percent).
|Women are from shredders,
men are from trash cans
The "Taking Charge" poll found a significant difference between men and women when it comes to credit card offers received in the mail.
Women are significantly more likely than men to shred their credit card offers (55 percent versus 43 percent), while men are significantly more likely to throw them in the garbage (34 percent versus 25 percent).
Financial planners and counselors say the results mirror what they see among their clients: Women are more conservative and men less cautious. Women are "doing the right thing" with the credit card offers, says Howard Dvorkin, founder of Consolidated Credit Counseling Services Inc. "The guy is just going to rip it up and hope nobody goes through the garbage can."
He adds: "Women are better with money than men and more attuned to financial pressures. The woman will go and seek help and seek a solution versus the guy who buries his head in the sand and hopes things turn out better."
Paula Boyer Kennedy, vice president of investment practice at Cammack LaRhette Consulting firm in New York, says of her clients, "Women are also much more likely to tell you what they don't know, whereas men tell you what they do know. Women might say 'I know absolutely nothing about this subject.' They start from a different place. Women say 'This is my ignorance' and men say 'This is my knowledge.' "
Handling children and credit
When it comes to managing credit cards with underage or adult children as authorized users, credit counselors warn parents to be cautious. A debit card linked to the child's own checking or savings account is a better alternative that limits spending to the cash available in the account, they say. (See 10 ways to build student credit)
The "Taking Charge" poll found that nearly two-thirds (66 percent) of account holders who shared credit cards with children said they -- rather than their children -- were responsible for paying the credit card bills. Another 20 percent said they shared responsibility for paying the bill.
What about giving your son or daughter your credit card to head to the mall? Don't do it.
"Every time I hear that I cringe," Dvorkin says. "You have no control over whether your son or daughter is spending $100, $200 or $2,000. It happens. I have seen where parents have given their cards to children with very specific spending criteria and say, 'Don't you dare spend more than X on this card.' Well, Johnny decides to go out drinking with his friends and he starts picking up the bar tab and there is a $1,500 bar bill."
Kennedy advocates a tough-love approach with children and credit cards and advises against authorized users or joint accounts.
"It gives them a safety net and I really don't want them to have a safety net," says Kennedy. "I want the buck to stop with them. That's the way life is; you pay for your debt. Kids get into debt and their parents bail them out. What's the message there? If you get into debt, your parents will bail you out?"
The "Taking Charge" poll also asked respondents at what age they felt someone should be allowed to use a credit card for the first time. More than two out of three (68 percent) said between the ages of 18 and 22. Only 7 percent felt children 10 to 17 years old should be allowed to use credit cards.
Says Dvorkin: "I don't like giving credit cards to people without jobs. Get them their own secured credit card with their own bank account so they can start learning about finances early on. Let them manage it. If they fall on their face, they fall on their face. Don't help them. Let them crash and burn. Teach them to make mistakes early on so they don't make them later when the stakes are higher."
The 2008 "Taking Charge" survey was conducted June 4-26, 2008, by GfK Roper Public Affairs on behalf of CreditCards.com, via random digit dialing phone interviews with 1,001 interview subjects. Interviewees were approximately split between males and females ages 18 and over, with 562 females and 438 males surveyed. The raw data was then weighted by a custom designed computer program that automatically developed a weighting factor for each respondent, employing five variables: age, sex, education, race and geographic region.
The total margin of error on weighted data for the full sample is plus or minus 3 percentage points at the 95 percent confidence level.
To comment on this story, write to: Editors@creditcards.com.
See other CreditCards.com polls: Poll: People scale back card use in changed economy, Nearly 3 in 4 feel need for more credit card regulation, 2007 "Taking Charge" survey, Poll: Credit card debt the new taboo topic, Gas prices take toll on family visits, U.S. not very eco-friendly with credit cards, Half of American won't spend their 'stimulus' rebate, Medical debt can wipe families out financially, Millions will borrow to pay '08 winter heating bills, Mortgage is 1st payment priority, credit cards last
See related: Credit card industry statistics: 2006-2008