Opening a joint credit card makes a lot of sense for a married couple. Each of you can have your own card, while you both help pay off the balance. You can share responsibility for groceries regardless of who goes to the store, and you can qualify for better financing terms and a higher credit limit when you combine your incomes.
Unfortunately, your combined financial resources will lead to some challenges when you decide to divorce. With rare exceptions, divorcing couples typically do not want to share responsibility for one another’s debts anymore. What will happen to your joint credit cards when you decide to divorce?
You will have to close most accounts
It is standard proceedings in many divorce cases to freeze all shared financial accounts, including credit cards and a couple’s primary checking account. Doing so prevents the wasteful dissipation of marital resources in the early stages of divorce when emotions run high.
Of course, closing all of your credit cards in a short time frame will also lead to some challenges for your household finances. You will need to open your own, separate credit card as soon as possible. You may need to reach out to subscription services and utility companies to change your billing information so that you don’t miss payments. You will also still need to pay off the balance owed on your shared, marital accounts.
How do you divide the credit card debt?
For many couples, credit card debt will play a significant role in their property division negotiations. One spouse may agree to pay off certain accounts, or the spouses may agree to pay all of the debt when they refinance the home during the divorce.
What is most important is not only that you find a fair solution but also that you minimize your personal exposure. Until the balance on shared accounts reaches zero, you could end up held accountable if your spouse doesn’t make payments as they should.
What about credit card rewards?
Whether you have an airline credit card that you use to upgrade your seat and make purchases when you travel for business or a cash-back card with hundreds of dollars of unredeemed rewards, you may need to negotiate what happens to those rewards when you close your account and settle your other property division matters. If you can’t agree, you will likely have to report those credit card benefits as part of the inventory of your marital assets in your divorce.
Having a realistic idea of what to expect regarding your finances during divorce will help those trying to plan for a happier future after their marriage.