Those combining finances with a partner need to understand the difference between joint credit card accounts and those with authorized user...
Those combining finances with a partner need to understand the difference between joint credit card accounts and those with authorized users.
By Christy Rakoczy, Mic
Many know that merging money with a romantic partner or relative is not a choice to be taken lightly, and that there are risks of combining credit cards, for example, in that your credit score — crucial for financial independence — could become vulnerable to your partner’s debt, spending and payment habits.
But
for people in abusive relationships, the financial control that one
partner exerts can compound problems faced by victims — and further
remove their agency as they seek to escape. A cardholder’s partner might
use their credit cards without consent, or they might force the
cardholder to add them to their account. That could mean soaring debt
and a sinking credit score, making it hard to take control by finding a
new place to live.
“Coerced debt is prevalent among women
who’ve experienced domestic violence,” said Angela Littwin, a professor
at University of Texas at Austin’s law school who specializes in
bankruptcy and consumer protection. “It’s one tool abusers can use to
control their victim and make it difficult for them to leave the
relationship.”
[post_ads_2]
Let’s say a woman’s credit score takes a
hit because her partner racked up debt on her card, for example: That
“will interfere with her ability to get a job, find an apartment and to
turn on the lights in that apartment,” Littwin said. Landlords, utility
companies and some employers check credit reports.
To
make matters worse, shifting trends in and rules around how credit
cards can be shared by partners means it can be particularly confusing
for financial abuse victims trying to protect themselves. Here’s what to know:
There are two ways to add a second person to a credit card account
You’ve basically got two options when it comes to putting more than one name on a credit card account: Open a joint account or add an authorized user.
The
latter option has become more common in recent years, as many
cardholders are no longer offering joint accounts. But both choices come
with big risks — including the potential for financial abuse, a serious form of domestic violence in which an abuser uses money to control a victim.
Many people think they have a joint account with their spouse or partner, but they actually don’t.
You can only be a joint account holder if you both open an account
together at the same time. If you want to add your partner later on — say after you get married — authorized user status would be your only option.
Even if you want to apply for a joint account together and are willing to submit a co-application, you may have a hard time finding a card that will allow joint owners. Only a few major card issuers currently allow joint accounts, while most only allow a primary account holder and authorized users.
Why opening a joint account versus adding an authorized user matters
[post_ads]It’s
important to understand the difference between the two kinds of shared
accounts. “With a joint account, both people on the account are
responsible for the debt accrued on the card — and responsible for paying it off each month,” Kimberly Palmer, credit cards expert at NerdWallet said in an email interview. “Authorized users,
on the other hand, are not responsible for the debts accrued, even
though they have the ability to use the card. They also are not able to
make changes to the card, like increasing the credit limit.”
This
is where things get problematic in an abusive relationship in which an
abuser charges massive amounts to the primary account holder’s card: “If
that person runs up $1,000 in charges on the card and doesn’t pay it
off, [the victim] will likely be stuck with the bill,” industry analyst
Matt Schulz said in an email interview.
The primary
account holder faces the biggest risks because the authorized user
doesn’t have any obligations to actually pay for what they charge to the
card. Authorized users can even charge legal fees on a credit card
during divorce and stick the primary cardholder with the bill, Brian
McNamara, a divorce lawyer in Kingwood, Texas, said in an email
interview.
While a divorce court could rule that shared
funds must be used to pay off the debt balance, the debt would still be
tied to the primary cardholder’s name, and failure to pay would still
only reflect on the primary cardholder’s credit.
Authorized users are at risk, too
The
biggest risk to being added as an authorized user, on the other hand,
is that you’re not building an independent credit history. While most card issuers
report a card’s history on the credit report of an authorized user, not
all do. So if you don’t have another card in your own name, you may
wind up with no credit history at all if you are removed as an
authorized user by your partner.
Even
if your status as an authorized user does get reported to credit
reporting agencies, “being an authorized user doesn’t have as strong an
impact as other behaviors, such as having a credit card in your own name
that you are responsible for paying each month,” Palmer said.
That
could make it harder to get your own card after a divorce or separation
if your ex cuts you off from their account. And not having access to
credit can be a contributing factor to someone feeling trapped in the
relationship or returning after leaving.
As many as
seven out of eight women will return to an abusive partner after
leaving, and many do so because of financial pressures, according to US News & World Report.
Though many statistics focus on women who experience domestic abuse,
people of any gender with partners of any gender can experience these
same patterns of financial abuse and domestic violence.
[post_ads_2]
This is how to protect yourself from financial abuse of your credit cards
The
number one factor to keep in mind when you are adding an authorized
user is whether you trust them not to run up a huge bill on your credit
card.
That may be easier said
than done if you are already trapped in a financially abusive
relationship, however. “To avoid it is hard, because people don’t
intentionally get into abusive relationships that involve coercive
control,” Littman said.
Financial abuse is one of the number one reasons survivors struggle to leave an abusive relationship. pic.twitter.com/AYvbrR2mML
— SafeHaven (@RCDVSafeHaven) July 12, 2017
If you are able to exert
control, it’s important to use equal caution before agreeing to add
yourself as an authorized user on someone else’s account. One step that
can help is to make sure you have at least one credit card in your name
only. “It may not seem necessary when times are good, but when things
head south, good credit can be a lifesaver,” Littman said.
If
you are the victim of financial abuse or domestic violence from a
partner, you can get help on repairing your credit and obtaining housing
through a local domestic violence coalition, Littman advised.
Some groups that might help include the National Coalition Against Domestic Violence and the National Network to End Domestic Violence. For more ideas on how to repair your credit after financial abuse, check out these ideas from WomensLaw.org, a project of the National Network to End Domestic Violence.
COMMENTS