Chasing rewards points backfires when debt piles up

To Her Credit columnist Sally Herigstad
Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006). She writes "To Her Credit," a weekly reader Q&A column about issues involving women, credit and debt, for, and also wrote for MSN Money, and, and has guested on Martha Stewart Radio and other programs.

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Dear To Her Credit,
Prior to our marriage, my husband opened a credit card and added his father as an authorized user. They enjoyed flight points with spending, and so both charged a lot on the card.

All was well until my father-in-law had financial problems and racked up $17,000 on the card. I found out about this after we were married, and I have urged my husband to figure out how to get out of it. I suggested my father-in-law open his own card or line of credit and transfer the debt, but he says that he can't get credit on his own. Any advice? -- Meg


Dear Meg,
Credit card rewards are great when earned and used wisely. As you've seen, they're not great for people who spend their way into debt, rationalizing that at least they're earning free airline tickets. Another problem is that it takes money to go on vacation, even with free plane tickets. Those flight points can cost unwary consumers twice -- first when they spend too much on their credit cards, and second when they fly someplace for a vacation they really can't afford.

When your husband authorized his dad to use his card, and then let him continue to use it after he got into financial trouble, the effect was the same as if he had given his dad $17,000. Your husband is legally liable for the debt.

If your father-in-law's financial situation is temporary; for example, if he's had a long-term illness or extended unemployment, let's hope things improve and he can make good on the debts he charged on the card.

I have heard of family debts being resolved in other ways. One adult child was reluctant to lend dad money, given his history of financial recklessness. Instead of taking a promise of money sometime in the future, which she was apparently skeptical about receiving, she offered to take some valuable collectibles instead. True, she would have eventually inherited the collectibles. But this way, she could help her dad, and have possession of assets now. Dad was happy because he hoped at least some of his collection would stay in the family, and he didn't have to worry about paying back the loan.

Another course of action, especially if your father-in-law is elderly and has other children, might be to have him make a provision in his will for an extra portion for your husband. Your father-in-law should consult a lawyer for help writing or amending his will.

If you and your husband are having difficulty making payments on this credit card debt, your options are the same as if your husband charged up the balance himself.

The best option is always to pay the debt off, perhaps by working extra hours, selling something, following a strict budget for a time, or a little of each.

If $17,000 of high-interest debt is an impossible amount for you to keep up with, let alone pay off, consider transferring it to a lower interest loan, such as a lower interest credit card. (If you transfer it to another card, watch out for balance transfer fees!) You could also explore taking out a low-interest home equity line of credit to pay off the card balance.

Another option is to settle the balance with the credit card company by paying less than what you owe, although that will damage your husband's credit score.

For most people still in their working years, $17,000 is not a large enough amount to justify filing for bankruptcy.

This debt is technically your husband's, not yours, even if you live in a community property state, because it was racked up before you were married. However, one side of the boat sinking will obviously affect your side, too. You and your husband need to work together to resolve this situation. Best of luck to you both as you plan your financial future together!

See related: Sharing a card with a parent can be risky, If loan to friend or family goes bad, you may take a tax deduction, Balance Transfer Survey: Offers more generous

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Updated: 01-22-2018