Editors' pick: Originally published Feb. 14.
If you're willing to conceal a credit card and make big purchases your spouse doesn't know about, what other secrets are you willing to keep?
If you want a great way to erode trust between you and your spouse, financial infidelity is a great way to do so. According to a survey by CreditCards.com, 12 million Americans have concealed a bank or credit card account from their live-in spouse, partner or significant other. These aren't just youthful indiscretions, either: older Baby Boomers (11%), those aged 63 to 71, are nearly four times as likely as Millennials to have had a secret account (3%). There's a cost to retaining that little shred of independence.
"Keeping secrets in your relationships is never a good idea," said Matt Schulz, senior industry analyst at CreditCards.com. "Like any indiscretion, what starts out small tends to build. Spending $25 without consulting your partner may seem incidental, but when those purchases become more frequent or if the amount grows, it can wreak havoc on your accounts and your budget.
Schulz was being kind with that $25 example. As it turns out, more than one in four (28%) people surveyed have admitted to spending $500 or more without consulting their partner. Again, Baby Boomers (39%) are nearly twice as likely to spend this amount compared to Millennials (20%). And, no, your partner isn't O.K. with that. Just one-third (33%) of respondents think it is fine for their significant other to spend $500 or more without asking. Males, Republicans and those with an income of over $75,000 were most likely to take that position. Just 20% of Americans report spending even $25 or less without first speaking with their partner. Parents (29%) are twice as likely to share this information as non-parents (15%).
If you think all of that surreptitious spending isn't doing damage to relationships, your oft-viewed credit card statement says otherwise. Roughly 17 million U.S. credit cardholders snoop on the spending habits of someone they share a credit card account with, according to a separate CreditCards.com survey. One in five cardholders in total admit to peeking at another person's online (16%) or paper (12%) credit card statements.
That's down from June 2008, when 20% were eyeballing printed account statements to see what someone else was spending, while 15% went online to play auditor. But just consider that 17% now say they feel closer to the other person because of the shared account -- almost double the 9% who said so eight years ago. If anything, that's only making the violation of trust worse, since you're sharing these accounts with those closest two you. Of those who share accounts, 48% do so with a partner or spouse and 10% are with an adult child. Just 5% are with children under 18. That's a lot of snooping among so-called adults.
All that snooping resulted in 19% of joint accountholders getting into arguments over those accounts during the recession and 12% still doing so today.
"When you share an account with someone, it's important to know what the other person is doing," says Matt Schulz, CreditCards.com's senior industry analyst. "Ideally, you'd talk frequently and openly with the other person, but if that doesn't happen, checking in on your fellow accountholder's spending can help you sniff out problems before they get out of control."
When all that secretive spending does go bad, it's crippling to both a couple's relationship and finances. By the third quarter of 2016, according to the Federal Reserve Bank of New York, total U.S. credit card debt hit $747 billion (up $33 billion from a year earlier). The Federal Reserve put total revolving debt at $981.3 billion in October, up 2.9% from a year earlier despite interest rates rising from an average 12.22% to 12.51% during that time.
According to credit statistics and analysis site WalletHub, the average household with credit card debt now owes $7,941 -- or just $523 less than WalletHub considers unsustainable for a median household income of little less than $52,000.
"It is not a question of whether consumers are weakening financially, but rather how long this trend toward pre-recession habits will last and just how bad it will get," says Alina Comoreanu, a research analyst for Evolution Finance and a WalletHub contributor. "Unfortunately, the immediate forecast does not appear too bright."
According to finance site NerdWallet, the average household with revolving credit card debt carried a balance of $6,885 as of June 2016 and pays $1,292 in interest, assuming an annual percentage rate of 18.76%. However, households that bring in more than $157,479 per year pay almost four times more in credit card interest than households that make less than $21,432.
Yes, higher-income folks are carrying far more debt, but they're more capable of paying it off. When a worker who makes $20,000 a year owes $3,611 in credit card debt, that's 18% of their annual income. When a household making $150,000 a year has $10,036 in credit card debt, that's less than 7% of its income. The self-employed are acutely aware of how rough revolving credit card debt can be: households led by self-employed individuals spend $1,631 in credit card interest annually, while heads of household who work for someone else pay only $1,211 to finance their credit card debt each year. Unfortunately, those put in the tightest spots by credit card debt are those who've come to rely on it most.
"Taking on debt to cover the gap between income and expenses is a short-term fix with costly long-term results," says Sean McQuay, NerdWallet's credit and banking expert. "Instead of taking on debt, try to increase your income by finding freelance work or a part-time job you can do on the side, or cut back on expenses where you reasonably can, before adding to your credit card's balance."
Also, just realize that money and love don't always blend so well. Anthony D. Criscuolo, a certified financial planner with Palisades Hudson Financial Group in Fort Lauderdale, Fla., notes that merging a couple's finances can get tricking if one or both partners have a lot of debt or past debt that was handled poorly. That said, since your credit reports are attached to your Social Security number, your partner doesn't get them or your credit history.
"Only debts and accounts that you open jointly will be tracked on both of your credit histories, and still they are tracked as part of your separate credit histories," Criscuolo says. "Joint accounts are just reported to the credit agencies under all of the Social Security Numbers that are on the account. There is no such thing as a 'joint' credit score."
Combining banking or credit card accounts may only complicate matters. Julie Pukas, head of U.S. cards and merchant solutions at TD Bank, notes that one member of a couple can authorize the other to use their credit card. The upside is that a cardholder with bad credit can have a parter or spouse with good credit help them polish up their credit score and look better in the eyes of credit bureaus. However, there is a catch.
"The authorized user can check with credit bureaus to see if the card is also reflecting on their own credit history," Pukas says. "Alternatively, it is important for the account owner to ensure that the authorized user is responsible and does not damage the credit scores for all parties."
If there's a little more faith on the part of both spouses, they can become joint accountholders. They both have to make payments on time and the card's performance is reflected on each of their credit reports. While it's great for budgeting and can help a couple racking up double the rewards points they normally would, it requires some trust on boths sides. If one of you just can't manage to regularly get payments in on time, that's a problem.
"If one spouse has a history of being financially irresponsible, especially if mainly due to late payments and missed bills, having the family finances managed by the financially responsible spouse can and will help boost the lower-credit score of the irresponsible spouse," Criscuolo says. "But it takes time."
Pukas notes that a good rule of thumb is to only add your spouse to a credit card or open a joint account once established spending guidelines are in place. That way, when it comes time to pay your bills, there are no surprises.
Even if you are able to work together on joint accounts, don't just ditch the cards you had before for the sake of transparency.The length of your credit history makes up 15% of your score, which makes it a bad idea to close credit card accounts that you have had for years. Keep them open, use it to make a payment or pay a bill that you can easily pay off every month and put the card in the bottom of a drawer somewhere -- or just destroy it altogether. If the temptation is too great, just cancel new cards instead of old ones so you don't lose your credit history.
Why does all this matter so much? Well, if the two of you are eventually going to buy a house together, a bad credit history can derail a loan or saddle it with an enormous interest rate. You can take out a loan in the name of the spouse with good credit, but that imbalance is going to carry into car loans, home-equity loans and others. Before you butt heads over those fairly major life decisions, have open discussions about credit early in the relationship and address any issues before one or both of your starts sneaking around with hidden credit cards or goes snooping through statements.
"Credit history is just that - a history," Criscuolo says. "It takes time to fix a bad history, but being married to someone who is financially responsible who will always pay bills on time will help the credit score of both account owners."