Let's talk credit: 8 must-have couple conversations
Disclosing personal charging habits to a loved one can be tough, but it's pivotal to a healthy relationship. Attitudes about using credit cards vary dramatically, and learning a partner's outlook can avert all-too-common money disputes. Here are the eight top credit issues every couple should tackle.
- What the cards should be used for. For some, credit cards are reserved for the occasional pricey purchase, while others think they're perfect for everyday use. Sound arguments can be made for both approaches, but to bypass strife, each person should voice their opinion and agree to unambiguous charging practices. Specifically, decide which regular and occasional expenses -- from monthly household bills to vacations and emergency purchases -- are acceptable to put on plastic.
- A livable debt figure. One person's minor balance is another's major liability. Discuss debt tolerance: State the balance that's within your comfort level, then have your partner do the same. You needn't accept owing more than you know to be destructive, but hear your partner out. "Open your mind to the other's perspective," says Olivia Mellan, co-author of "Overcoming overspending: A winning plan for spenders and their partners." "Listen, then play back what they said." Mellan says couples should take these discussions slowly, be respectful and not interrupt. And if a fight brews? "Calm down and come back. Timeouts are OK."
- When and how to redeem rewards points. What do you want to do with all those valuable points you've accumulated on your rewards credit card? Cash back? Sports equipment? A Hawaiian holiday perhaps? Converting numbers into goodies is an exciting aspect of credit use, but it can also instigate an argument if you don't have a prearranged plan of when and how to redeem them. Together, make a habit of reviewing the status of your rewards program, turn building points into a couples project and discuss how each of you would like to cash them in.
- When to open a new credit line. Individuals may apply for credit cards at will because it just impacts their own finances. Married couples, though, need to assume a mutual approach. Decide how to communicate, be it a phone call before submitting an application or bringing the paperwork home to review it at length. Don't worry about missed deals, says Syble Solomon, creator of Money Habitudes, a financial communication tool for couples. "Say no to any financial decision that you have to make in 15 minutes or less." It's more important to thoroughly examine the details of a new account than to be hasty.
- Who should be the account manager. The partner currently on account management duty may not be the ideal supervisor. If there is a pattern of late or missed payments, a haphazard statement and billing administration system, or any other serious problem, add a change in employment status to the agenda. Discuss who wants the task and who would be best for it. Hire right and you can circumvent strife plus costly mistakes. The primary manager must share all credit data, but, says Solomon, "it is equally the responsibility of the other person to ask questions, know where to find information and be aware of the basics."
- Whether to have joint or individual accounts. There's no reason anyone should abdicate economic independence. Co-signed accounts are not a relationship requirement, and in fact, can sometimes cause more problems than not. After all, not everyone is comfortable disclosing charging habits. On the other hand, individual accounts can be a breeding ground for secrets, which is rarely conducive to harmony. Every couple is unique, so talk about which card type is right for your partnership.
- When to check credit reports and activity. Whether you're married or co-habitating, your credit history isn't totally merged with the other person's. Still, if you intend to borrow for a major purchase (such as a home), a lender will consider both parties' financial information. Be transparent about your reports and scores. Conquer disclosure fears, says Mellan, as it will lead to a stronger connection. "Ask the person who isn't comfortable what they're afraid of. Do they think you'll be critical or judgmental? Are they worried about acknowledging a spending problem?"
- A credit and debt disaster plan. The best time to prepare for a crisis is when things are going swimmingly. For this reason, confer about charging practices in the event of unexpected income reduction, high medical bills, expensive car repairs and other hardship situations. Note that borrowing in these circumstances usually does more harm than good. Charging can offer temporary relief, but the burden swells if debt isn't repaid quickly. Also on the table: what to do if you lose your credit cards, and how to address identity theft issues.
Because neither relationships nor the economy is static, address these credit topics early and regularly. Commit to compromise and honesty, and enjoy the discussions. Not only will they refine your charging habits and reduce discord, you'll surely gain a deeper understanding of each other.
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