Credit rules for new widows

Credit cards pose unique risks for women who have lost a spouse

Tamara E. Holmes
Personal Finance Writer
Writes regularly about personal finance and health

Credit rules of the road for new widows

Losing a spouse is often one of the most traumatic experiences one can endure. For widows, the emotional toll can be compounded by financial challenges and credit card debt.

Each year, more than 700,000 women in the United States become widows, according to Widows Well, a service that strives to help widows make sound financial choices. American widows on average face a 37 percent decline in household income when their spouse dies, while widowers experience only a 22 percent drop when their wives die, the U.S. Government Accountability Office has found.

Carole Brody Fleet learned firsthand how financially devastating a spouse’s death can be when her husband died of amyotrophic lateral sclerosis (ALS), a disease often referred to as  Lou Gehrig's disease, that affects nerve cells in the brain and spinal cord.

“I was that person where months would come where I had to choose between the payment on my daughter’s braces or making a full mortgage payment,” she recalls. “I was left in financial ruin.”

Credit cards: A help or a hindrance?

For widows working with less money after their husbands die, credit cards can help smooth the transition.

For example, if a widow doesn’t have the average $7,181 it costs to pay for a funeral, it might make sense to charge it on a balance transfer credit card with a 12-month, 0 percent promotional offer and take the year to pay the balance off.

However, if you’re using credit cards to make ends meet each month, debt can quickly become overwhelming.

Credit card debt is one factor keeping women from having a secure retirement, says Cindy Hounsell, president of the Women’s Institute for a Secure Retirement. “They don't have as much money to save for the future.”

Indeed, total debt among women in their 50s and 60s has more than doubled in recent decades, and the percentage of older women with less than $25,000 in savings has also risen, according to a 2017 study by the TIAA Institute.

Another risk is when widows use credit cards for compulsive shopping to ease their grief.

“It can be a numbing agent, and the next thing you know, you’re buying things you don’t need and you’re living beyond your means,” says Fleet, who wrote “Happily Even After: A Guide to Getting Through (and Beyond) the Grief of Widowhood.”

Well-meaning advice can even lead a widow financially astray.

When Christina Polovich lost her husband of 13 years eight years ago, friends and family would say things like, ‘You should buy yourself something,’ or encourage her to buy things that would make her two sons happy after their father died.

“Once a widow falls into the spending trap, it’s hard to climb out of it,” Polovich says. “You lose yourself in the process of grieving and spending. My spendathon lasted almost four years.”  

The problem with using spending as a bandage is it’s only a temporary fix. “It all wears off and you’re still faced with grief, except now, you’ve got credit card debt,” Fleet says.

Maintaining credit

While money challenges can compound the grieving process, protecting your credit is critical, says Martin Lynch, education director for Cambridge Credit Counseling in Agawam, Massachusetts.

If you use your credit cards for some expenses, try not to let your account balances get to more than 25 percent of the cards’ limits, and avoid charging anything that will take more than a few months to pay off, says Lynch.

"Once a widow falls into the spending trap, it's hard to climb out of it. You lose yourself in the process of grieving and spending. My spendathon lasted almost four years."

“Building or maintaining good credit will help you earn lower interest rates, saving you money,” Lynch says. Widows can ward off financial disaster by taking the following additional steps.

Managing money after becoming widowed: 5 tips

1. Assess your education.

Some widows never managed the family finances so they’re not only working with less, but they may have to learn the rules of using credit wisely as they go.

If you’re in this category, a nonprofit credit counselor can help you prepare a working budget, review your current obligations and ensure your near-term situation is accounted for, Lynch suggests.

You may also want to consult with a licensed financial planner, and tax and insurance professionals to make sure your long-term financial goals are met. 

2. Determine sources of income.

If you have enough money coming in, you’re less likely to run up credit card debt.

Determine whether there is a life insurance policy for which you are the beneficiary and contact other potential providers of income such as the Social Security Administration, the U.S. Department of Veterans Affairs or your spouse’s employer.

If you have limited income and dependent children, you may qualify for federal or state assistance programs, Lynch suggests.

Don’t forget to reach out to churches or other organizations you belong to. “Many churches have funds available for parishioners going through events like this,” Lynch says.

3. Address your spouse’s debts.

Confirm that all debts for which your spouse may have been liable to pay have been satisfied by the proceeds of his or her estate.

If you’re not sure which debts you might also be responsible for paying, talk to an attorney, Lynch says, particularly if you live in a community property state.

4. Update your budget to reflect your new reality.

Make sure your budget reflects your current income and expenses.

If you’re not on your utility providers’ budget plans, enroll in them, Lynch suggests. “You want your monthly budget to be as predictable as possible.”

If you fall behind on your rent, mortgage or other bills, contact your creditors to try to work out a payment plan.

5. Avoid impulsive spending.

To stop yourself from soothing yourself into debt, avoid making new financial commitments, especially in the immediate aftermath of the event, when people often make poor financial choices, Lynch says.

When your world is turned upside down by a spouse’s death or any traumatic situation, give yourself plenty of time and patience to turn things around.

“Time may not heal the wound opened by the death of your loved one, but it can give you perspective on your financial options, especially if you’re patient and conservative,” Lynch says.

See related: What happens to credit card debt after death?, Can an executor use deceased’s credit cards?, 4 common scenarios for card debt liability after a cardholder dies

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Updated: 01-21-2018