6 steps to using credit cards to manage caregiving costs
Nearly one-third of Americans provide caregiving services for a family member or friend who is disabled or chronically ill. But unfortunately, caregiving doesn't come cheap: 46 percent of caregivers spend more than $5,000 each year on expenses such as medications, medical bills and in-home care, according to a September 2014 study by Caring.com.
When it comes to managing those costs, credit cards can help cover unexpected expenses and allow one family member to make purchases and be reimbursed by others. But they can also be a nightmare if family members use them irresponsibly and rack up huge debts, says Nina Heck, director of counseling and client services for Consumer Credit Counseling Services of Maryland and Delaware.
If you're looking for ways to keep caregiving costs in check, here are six ways to use credit cards to your advantage.
1. Establish a family budget. Before spending a dime on caregiving costs, figure out how much the person who is being cared for has to contribute to the care, says Heck. That money may come from personal savings or other sources such as Medicare or disability benefits. If there's a shortfall, family members should examine their own budgets to determine how much disposable cash they have. Some family members may be able to pay more than others, and nonmonetary contributions -- such as taking the loved one to doctor's visits -- can even the load. When setting a budget, avoid debt. "That just adds more of a burden to the family as a whole," Heck says. Designate one credit card for caregiving expenses, and pay it off monthly so the cardholder isn't charged interest.
2. Come up with a financial point person. "Financial issues are often at the root of family disagreements when it comes to caregiving," says Leah Eskenazi, director of operations for the Family Caregiver Alliance, an advocacy group for caregivers based in San Francisco. Determine who will make caregiving purchases and come up with a plan for other family members to reimburse them. Some people are naturally better at managing money than others, says Eskenazi. In some cases, the person who handles the money may be the one with the most time and opportunity to devote to the caregiving cause. Once decisions are made, put them in writing and distribute copies to all family members.
3. Designate authorized users. One of the greatest benefits of using credit cards for caregiving costs is you can have more than one authorized user on an account. For example, American Express lets primary cardholders give others access to their credit line through the use of additional cards with custom limits. "The additional card is printed with the other person's name, plus a unique account number," says American Express spokeswoman Kimberly Litt.
Not only can other family members be set up as authorized users, but if you hire a professional caregiver, that person can also be added to a credit card account to make caregiving purchases on your behalf. If you do hire someone outside of the family, Heck suggests you ask to see a credit report before handing over a credit card. Caregivers with problems handling their own financial obligations may not be the best ones to have accessing your credit.
Financial issues are often at the root of family disagreements when it comes to caregiving.
|-- Leah Eskenazi
Family Caregiver Alliance
Some adult children may choose to become authorized users on the credit card of an elderly parent who is being cared for. That can pose big problems, particularly if the family doesn't have an accountability system in place. It can be too easy for the authorized user to start using the card for personal reasons or to be less financially responsible with the parent's card than they would be with their own, says Heck. "We've counseled elderly people where family members have taken advantage of their credit account and all of a sudden you have a person in their late 80s burdened with thousands of dollars of credit card debt," Heck says.
4. Keep the lines of communication open. One initial meeting isn't enough to handle ongoing financial obligations, says Rhonda Caudell, who founded Endless Legacy, an elderly parent care coaching practice after her own experience with caregiving. Set up regular meetings via email, phone, teleconferencing or Skype to keep everyone involved, Caudell suggests.
5. Have a system for tracking purchases. Most credit card accounts can be accessed online so it's easy to note all of the purchases that have been made. "It's very easy for someone to go to the pharmacy to pick up a prescription and then put some of their personal expenses on the credit card," says Heck. By having more than one family member track spending closely, everyone remains accountable. Some card issuers also offer more advanced tools for monitoring the account. For example, Discover's Spend Analyzer tool can show caregivers which categories they're spending the most on so they can budget for those necessities better in the future, says Discover spokeswoman Jenna DiMaria.
6. Take advantage of rewards. A rewards card can give you more buying power, which can lower the financial burden. For example, cash rewards can be plowed back into the account for caregiving purchases, and rewards miles can be saved for family visits.
Credit cards are a useful tool that can help family members manage ongoing and unexpected expenses, as long as they don't use the cards to contribute funds that they don't have. "Each individual has to honestly evaluate their own financial situation and family obligations and do the best they can," Caudell says.See related: Don't share accounts with elderly parents
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