Joint vs. authorized user: Which is best if you’re married?
In an earlier blog post, I described the delicate balance of managing money together without feeling as if you’re micromanaging. Another area for newlyweds to consider is whether they want to open a joint credit card, add one spouse as an authorized user to the other spouse’s card or keep the credit cards entirely separate. This is a conversation my soon-to-be husband and I recently had, and we settled on a combination of joint and separate credit cards plus with one card where I added him as an authorized user.
Here’s a look at the differences between joint credit cards and authorized users.
The main difference between being a joint card holder and an authorized user is that “when two people are on a card as a joint user, they are both jointly liable for the debt no matter who actually ran it up,” says Manisha Thakor, author of ” Get Financially Naked: How to Talk Money with Your Honey” and director of wealth strategies for women at Buckingham and the BAM Alliance.
A couple might choose a joint card for the sake of creating a sense of equality and long-term partnership. However, if you live in a community property state (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington or Wisconsin), you can be held liable for debt your spouse acquires after you marry even if your name is not on the credit card agreement.
It’s important to note that even if you and your spouse open a joint card account, you still have separate credit scores and credit reports. The payment history and balances on your joint card will show up on both spouses’ credit reports. A spouse with a lower score may mean that you have a harder time qualifying for joint credit such as a mortgage or auto loan, but simply marrying someone with a lower credit score doesn’t automatically lower yours.
“In the case of an authorized user, the primary card holder has the legal obligation to pay back the debt,” Thakor explains. “The authorized user has no legal requirement whatsoever.” (Again, there are more wrinkles in community property states as mentioned above.) So, in theory, a spendthrift spouse could charge up the card as an authorized user and leave you holding the bag. But couples might still choose this option if one spouse needs help building credit or if being an authorized user would give them access to credit card perks such as cash back or airlines miles. (We did the latter so we can both get access to airport lounges when we travel!)
For couples who choose this approach, Thakor suggests that the primary cardholder set up email alerts on purchases. That way you can get “immediate notification when your authorized user is doing anything and address it with them real time or insist that they return the item,” she says.
Finding what works
There’s no one-size-fits all approach to money, so the right framework might depend on a couple’s age, financial situation and how complex or simple they want their finances to be.
Since we’ve already gotten used to paying our own credit card bills, a combination of joint and separate credit cards works for us. This is an approach that Thakor calls a “financial three-way” where couples have a joint account and also maintain separate accounts. They would use a joint credit card for joint costs where you “want to share the liability and you’ve agreed to partner on those expenses,” Thakor explains. You’d then pay individual expenses using your individual credit cards, allowing yourselves some autonomy while still assuming joint responsibility for joint expenses.
An outdated approach that’s becoming less common is to have all of the credit lines in one spouse’s name (typically the husband’s). Even if one spouse has no income, both spouses should have some credit in his or her own name. If one spouse dies or the relationship ends in divorce, the spouse without a credit history could find herself at a significant disadvantage when it comes to buying or renting a home, a car and other big-ticket items.
Whether you choose joint or separate cards or add your spouse as an authorized user, communication and collaboration are key to managing credit together.
6 times when it’s smart to call your card company
No one likes calling their credit card companies, but sometimes, it can pay off.
Here are six times when calling your issuer is worth the effort:
1. When you forget a payment
It happens to the best of us — even people whose job it is write about credit cards. In fact, I was guilty of this just last month. I recently opened up a line of credit with Home Depot to buy a new dryer and figured I might as well take advantage of the six-month interest-free period rather than take a big chunk from my savings. As I waited for that first bill to come, I kind of forgot about it until I found it stuck to another piece of mail I had put aside. The due date had passed.
What to do: I called and explained about my embarrassing mistake, promised it wouldn’t happen again and said I planned to make a payment above the minimum. The customer service person let me know that they have a one-time forgiveness for a new account and that the late fee would be waived. Because it was only three days late, it wasn’t reported to the credit bureaus. Whew — crisis averted! Once the call was done, I set up my auto payments so that the balance will be paid off before the introductory period of zero interest is over.
Your mea culpa will also make it less likely that the issuer will impose an extra penalty, like hiking up your interest rate.
2. Before you go on a trip or huge spending spree
A friend of mine recalled the time she went to Ireland and had her card declined when she tried to rent a car. It was because the bank flagged the activity as a possibly fraudulent charge since she was out of the country. She was able to resolve the problem on the spot, but it cost her a hefty fee for the international call she had to make from her cellphone.
What to do: Before you’re about to use your card in a way that’s not typical for you, take a minute to alert your card issuer so that it can make a note on your account. Let the issuer know in advance your travel dates or if you’re planning to make a very large charge on the account .
3. If you’re confused
Whether you’re having trouble redeeming points or don’t know what kind of rental car coverage you have, just call.
What to do: Make a list of questions and get them all answered. You might just find out that you have thousands of unredeemed points or that you can stop paying for extended warranties because your card covers you.
4. To cash in on your good behavior
If you’ve been a loyal customer, and your credit score is in better shape than it was when you opened the card, don’t wait around for a gold star. Ask if you qualify for a lower interest rate or can get your annual fee waived. A recent CreditCards.com survey found that 65 percent of people who asked for a rate reduction got it.
What to do: Explain that you’d love to continue using the credit product, but are hoping the issuer will consider lowering your interest rate because of your strong history of on-time payments and stellar credit. Trent Hamm of The Simple Dollar offers a simple step-by-step on how to get creditors to say yes.
5. If you’re facing a crisis
It could be worthwhile to reach out to your creditors if you’re going through financial difficulty. Right after Super Storm Sandy, my mother’s card company sent an email blast to customers in her geographic area since it was hit hard, saying to contact them if they needed assistance. My mom, who had significant damage to her home, called and the card issuer ended up offering her several months of zero interest on any purchases made on appliances or other items she needed to replace. This saved her a nice amount of money since she was able to get what she needed, and then pay off the balance once her insurance claim came through.
What to do: If you come on rough times, be forthright with your creditor. It may be able to offer a small gesture such as giving you a one-time due date flexibility or waiving a late fee if, for instance, you were in the hospital and missed a payment. Every little bit helps.
6. If you suspect something fishy is going on
The minute you see a charge you don’t recognize, don’t hesitate to call. First, though, track back through your spending to see if there was a purchase you forgot about (maybe something auto-renewed, for instance). Particularly take note of small charges — scammers hope you won’t notice.
What to do: Someone in the fraud department can help you determine if further action needs to be taken.
Picking up the phone is often the biggest hurdle. But in my experience, if you’re pleasant to the person on the other line, they’ll be more than happy to help you resolve your issue. As for the cheesy hold music, you’ll just have to deal with it.
Managing money without micromanaging each other
Merging finances as a couple isn’t easy, especially if you’ve developed your own financial habits for a decade or longer before tying the knot. Even after a two-year engagement and two months away from our wedding, my fiance and I are still refining our shared money management strategy.
We both earn money and are careful with it, so we don’t want to micromanage each other’s spending. But we do want to avoid duplicate purchases (we’ve been known to buy the same Groupons, so I now check with him first) and build a stable financial future. Over at SavvyMoney, Jean Chatzsky suggests that couples use a three-pot system where each person has a personal account and the couple uses a joint account for household expenses.
For the first year of our engagement and cohabitation, we maintained separate checking accounts (more out of habit than anything else), but split our rent and living expenses. We didn’t stress about who bought a new pair of jeans (probably on sale) or splurged on a dinner with friends (probably purchased with that Groupon) as long as we’re also saving for our goals.
The next year, we set up a joint checking account, joint credit card (more on that later) and bought a condo together (interestingly, home-buying amongst unmarried couples is on the rise, so we’re part of a trend).
Buying a condo and saving for a wedding have a way of making you more aware of where your money is going, so I suggested we agree to a pre-determined amount we can spend before consulting the other person (excluding gifts for each other), a strategy many couples use to stay on the same page financially. “Fifty bucks,” he suggested. We tried that, but ended up feeling that a $50 limit was too restrictive. Who wants to text your spouse for permission to fill up the car with gas or buy groceries? We could agree that it’s only discretionary purchases that require a conversation, but that can also get murky.
So, we abandoned the $50 rule and agreed to use our best judgement about when to consult each other. One afternoon he called and said he thought our joint credit card had been compromised (he gets smartphone alerts every time the card is used above a certain threshold). “There’s a $27 charge at some Thai restaurant,” he said, “which is weird because you never eat lunch out.”
I work from home and usually make my own lunches, but that day I’d run into a friend and we decided to grab a quick lunch together. I didn’t have any cash and that was the only card in my wallet at the time, so I charged our lunch and my friend gave me a wad of bills (a strategy I sometimes use to accumulate credit card rewards since we pay the balance off every month). It was an uncharacteristic move on my part for sure, but hardly cause for alarm, although I appreciated him checking in.
We talked about raising the threshold that requires discussion, but it seemed like setting a minimum of $200 or $250 might let some large-ish purchases fly under the radar or catch the other person by surprise. Then I read the Money Magazine poll that found the average amount couples allow each other to spend before consulting the other person is $154. And the interesting thing is that amount is consistent across generations despite differences in earnings between older and younger workers.
I think that for us, an even $150 could strike that happy medium between micromanaging and operating in totally separate spheres. But of course I’ll consult him.
Traveling to Greece? Here’s what you need to know
Amidst the country’s financial crisis, tourists visiting Greece may have a tough time withdrawing euros from ATMs or using their credit cards in some cases. (And on the flip side, one newlywed couple reportedly had their Greek credit cards declined while honeymooning in New York City.) Earlier this week, Greece voted to reject Europe’s latest bailout offer, and an exit from the European Union is still considered a possibility.
Travel experts say it’s not necessary to cancel existing trips to Greece. “I can’t stress enough what a wonderful country Greece is and how warm, friendly, generous and welcoming I found the Greek people,” says Vanessa Chiasson, creator of the travel blog TurnipSeedTravel.com. “Obviously this is an extremely challenging time for the country, but there’s no reason why respectful travelers wouldn’t be welcomed as warmly as before.”
That said, you may want to consider these steps to avoid or minimize disruptions whether you’re traveling to Greece or elsewhere.
- Notify your credit card company before you leave. If you forgot to notify your credit issuer of your travel plans and you find yourself with a frozen card, “it could simply be that you didn’t notify them that you were traveling overseas and thus they froze the card because of unusual transaction activity, not because of what is happening in Greece,” Chiasson points out. Write down the international numbers for your credit cards before you leave and keep that separate from your cards so that you can contact your credit card company if needed, even if your card is lost or stolen.
- Bring multiple sources of money. A good rule of thumb is to “always bring a few days’ expenses in cash, bring two ATM cards for two different banks (doubles your daily withdrawal limit and/or limits time waiting in line for the ATM), and have two different credit cards,” says Jeremy Jacobson, the blogger behind GoCurryCracker.com. Jacobson says he and his family are actually considering changing their travel plans to include Greece, as there could be some good deals to be had during the country’s transition.
- Keep your cash safe. Warnings about muggers and pickpockets in Greece serve as a cautionary tale about not flashing big wads of cash and keeping separate stashes of cash whenever you travel. In case one stash goes missing, you’ll have other bills to use. Chiasson suggests dividing cash between a money belt and hotel safe. Also consider customs restrictions. Travelers entering or leaving the EU with €10 000 (about $11,000 USD) or more in cash or the equivalent must declare funds to customs authorities, but that’s probably more than most travelers would bring anyway.
- Consider buying travel insurance. A good travel insurance policy could help in a pinch. For instance, a “cancel for any reason” policy would allow you to get the bulk of your trip costs refunded if the financial situation deteriorates further and you decide not to go. “I think all travelers require travel insurance and you should have it before you go to Greece, not because it’s Greece, but because it’s travel,” Chiasson says.
- Weigh your other options. If you’re really in a bind, the U.S. consulate may be able to assist you in returning home, but in less dire situations, you might be able to wire cash to yourself or get help from your credit card company. “Many credit cards also include emergency assistance for travelers, including the option of delivering cash to travelers in need,” Chiasson says. A cash advance at a foreign exchange office might be another option, but be prepared for hefty fees.
5 tips to boost savings using cash back shopping portals
By now, most savvy online shoppers know to use a rewards card and search for a coupon code before they check out. I user the browser extension honey, which can automatically search for and test out promo codes at checkout; it hasn’t saved me any money yet, but it’s definitely saved me time searching. Here’s another strategy for your money-saving toolbox: cash-back shopping portals.
Websites such as BeFrugal, Ebates, Extrabux and ShopAtHome have affiliate relationships with major online retailers, so you can earn a portion of their affiliate fees when you click their website before buying.
For instance, if you are shopping online at Bloomingdale’s, you could earn 11 percent cash back on your purchase through Extrabux. Or if you were booking a trip through Travelocity, you could earn up to 5 percent cash back through ShopAtHome. That’s in addition to whatever rewards you might earn through your credit card issuer (my issuer used to have its own shopping portal for earning bonus points, but the portal was discontinued earlier this year).
When your total cash back reaches a certain minimum threshold (say, $10 or $25), you can request payment in the form of a check, PayPal transfer or gift card, depending on the site. MagnifyMoney has published posts comparing BeFrugal vs ShopAtHome, Ebates vs Mr. Rebates and TopCashBack vs FatWallet. Some major airlines operate their own shopping portals, such as Skymiles Shopping (Delta) and the ShopTrue Mall (JetBlue), that sync up to your frequent flyer account and earn you miles instead of cash.
Here’s a look at how to use these sites to maximize your savings.
- Cash in on bonuses. Many of these sites offer cash sign-up bonuses and referral bonuses if you refer people who buy through their site. For instance, Hustler Money Blog points out that Ebates is offering a Tell-A-Friend promotion through June 30, 2015, where you can earn a $10 sign-up bonus plus a $75 bonus for referring three friends.
- Check the exclusions. Some retailers post coupon codes on cash-back sites so that you can boost your savings while earning cash back. But in some cases, using a promo code from another source (say, an email or a third-party website) will cancel the cash back. Some retailers may also cap the amount of cash back you can earn (say, you can only earn 5 percent on the first $1,000 spent with that retailer) or only offer cash back on certain items (gift cards or purchases from certain departments may be excluded, for instance). Typically, the cash-back site will publish fine print specific to each retailer, so if you’re unsure, check the fine print before purchasing.
- Disable AdBlock. If you run a browser extension such as AdBlock, you may need to temporarily disable it while you’re shopping so that your shopping trip is logged correctly.
- Compare cash-back rates. Cash-back rates can fluctuate over time and vary by site (for instance, at the time of this writing, BeFrugal is offering 6 percent cash back at Macy’s, while Ebates offers 8 percent). If you really want to maximize your savings, check SavingCashback.com to see which site offers the highest rate with popular retailers. However, you might choose to shop through a website with a lower cash-back rate if you’re trying to reach the minimum threshold so you can get a payout. After all, having a few dollars scattered across multiple websites offers little benefit if you’re never able to actually collect.
- Keep your contact information current. Some cash-back sites will issue a check or transfer money via PayPal automatically at certain intervals throughout the year as long as your balance is above the minimum threshold. Any time you move or change your PayPal email, be sure you update your account information to avoid lost or delayed payments.
While it does require a few extra steps, I’m always excited to get my “Big Fat Check” as Ebates calls it or a PayPal transfer from one or the other sites, because it’s basically free money on things I’m buying anyway. Even if you’re not excited about a few pennies cash back on small purchases, it’s still worth remembering for big online purchases like furniture or travel.
Home buying isn’t the time to discover credit scores
Thinking back to when I bought my home about 8 years ago, it was the first time in my life that I ever saw a breakdown of my credit scores. I remember feeling pleasantly surprised that it was in the good range to qualify for a favorable rate, but I realize now that I should have known where I stood before I began serious house hunting. Lucky for my husband and me, our credit was good enough to move forward with the home buying process, but for many, that’s not the case.
Based on the recent Home Buying and Credit Survey Report by Experian, many people enter into the home loan arena just as green as we did. And for some, an unexpected poor credit rating puts home buying plans on hold.
Take a look at some of the report’s findings.
* More than 2 in 5 homebuyers worried they wouldn’t qualify for best rates and delayed purchasing to improve credit. Of the people who felt they were the most financially prepared, 70 percent of them knew their credit score going in. And, once their credit scores were revealed, 31 percent of people said they were surprised to see something negative.
Keeping tabs on your credit reports and credit scores is wise for so many reasons, but first and foremost, it’s to make sure that someone hasn’t opened a fraudulent account in your name. The longer such fraud goes unnoticed, the bigger the hassle it will be to repair the damage. If your goal is to buy a home, it could definitely set you back for some time.
* Working to improve credit is something that 55 percent of respondents said they did before applying for a home loan. That’s the good news. However, only half said they actually knew their credit score beforehand.
That’s kind of like trying to eat really healthy the week before you go for a physical to try to get better lab results. It doesn’t work that way at the doc or with your credit. You need consistent, good credit behavior over time at least for a few months to see significant progress in your credit score. And knowing which areas need improvement which is revealed when you analyze your detailed credit score report — is half the battle.
* Scary stat: 35 percent of future buyers said they don’t know what to do to improve credit.
If you have poor credit and no idea how to improve it, you probably need to have a conversation with a credit counselor or financial planner before you make a decades-long commitment to pay back hundreds of thousands of dollars involved in a mortgage. It’s hard enough dealing with a hefty house payment and other bills and expenses, but to do so without having a good handle on your finances first is a disaster waiting to happen.
* People are less informed about their credit’s impact on refinance applications. Only 62 percent who plan to refinance their mortgage said credit scores will affect their interest rate.
Once you’re locked into a 30-year mortgage, you might be less concerned about maintaining a stellar credit score. The problem is if you allow your credit score to slip too much, it could come back to bite you if you end up trying to refinance your mortgage at a better interest rate.
Because I bought my house before the real estate market plummeted, I was one of the people who really stood to benefit from a refinance, which would drop my interest rate more than 2.5 percent. My biggest hurdle ended up being that my home value dropped so much that I barely had enough equity to qualify. What I did have going for me, however, was a fantastic credit score. After a couple of frustrating failed attempts, I found a lender that was able to make the refinance happen, but had my credit been subpar, I would have missed out on saving hundreds of dollars per month.
As the survey illustrates, buying a home is often the first major reality check for people that their credit score does matter. Although credit scores matter in order to qualify for an auto loan, an apartment or a job, the stakes are probably the highest for homebuyers.
Don’t wait until you’re attending open houses or meeting with realtors to start thinking about your credit status. Pull your free credit report from the three credit bureaus (Experian, Equifax, and TransUnion) via annualcreditreport.com, and get your credit scores, too (for about $20 each from MyFICO.com. That way, you’ll have time to make necessary improvements, and there will be no surprises.
Why foreign transaction fees matter even if you don’t travel
Many credit cards geared toward business or leisure travelers boast about no foreign exchange fees. If you don’t travel abroad often, you may think that doesn’t matter.
But as I recently discovered in a Kafkaesque exchange with customer service, you don’t have to leave home to get charged this fee. If you’re doing business online with a company that uses a foreign bank, that fee can also apply — even if the transaction is displayed in U.S. currency and there’s no mention of a foreign bank, foreign currency or foreign transaction. As business becomes more global, this is another good reason to add a card with no foreign transaction fees to your wallet, even if you rarely (or never) cross the border.
In my case, I purchased a year’s subscription to online content I can access through my smartphone. Several friends in the U.S. had recommended the company — and because the website didn’t scream: “Hey, we’re a British startup but we’ll take American money!” — I assumed the company was based somewhere in Silicon Valley, as many emerging tech companies are. When I checked out, I selected U.S. dollars, but that didn’t set off any red flags in my mind, because online content doesn’t require shipping, and theoretically you could buy and access the content anywhere in the world.
Then, when I checked my card transactions online (which I suggest you do often; Ashley at Saving Money in Your Twenties agrees with me), I noticed that my bank had tacked on a foreign transaction fee (fortunately, only 1 percent). I called (also a good idea; Miranda at Ready for Zero has tips on getting card fees waived) expecting to get the fee waived once I’d explained that the transaction was in U.S. dollars and was made from my home computer, so the fee shouldn’t apply.
The first not-so-helpful customer service rep told me that the currency of the transaction was irrelevant and the fee was actually charged because the company uses a foreign bank. “I understand that I’ll pay a fee if I use this card in another country, but there was no mention of foreign banks or foreign currency on the website,” I said. “I’ve had great experiences with this card for the past eight years, so can you waive the fee just this once for a loyal customer?”
No, she could (or would) not.
Instead, she suggested that she could transfer me to the disputes department, and I could dispute the transaction (Holly at Get Rich Slowly offers tips on disputing card transactions). That didn’t seem like the best approach (the company had delivered the content I wanted, after all), but I agreed to try that.
The next rep told me that I could not dispute the transaction because the fee had been charged by the card, not the merchant. “Shouldn’t the merchant disclose that there was a foreign bank involved?” I asked. “This doesn’t seem like a responsible business practice, and I’d like that money refunded.”
He responded that if a merchant is operating outside of the U.S., they wouldn’t be subject to any sort of U.S. rules around disclosure, and essentially it was my fault for not researching the company more carefully before buying. (“Really? Do consumers even know to look for a relationship with a foreign bank?” I wondered.) He offered to transfer me back to customer service so I could ask again to waive the fee.
Once transferred, I explained again that I was aware of the foreign currency fee and expected to pay it while traveling (unless I used one of my three other cards that don’t charge a fee — that’s the maddening part about this whole situation!), and got shot down one final time.
Out of curiosity, I checked the contact page on the company’s website and saw that it has offices in California and the United Kingdom (but no .co.uk URL, which would have made it obvious it was a UK company). I suspect they’re trying not to broadcast a specific location to appeal to a global audience, but it had never occurred to me to check the location for an online product.
I’m not going to close that card (after all, it’s one of the cards I’ve had the longest and length of history accounts for 15 percent of your FICO score), but I am going to use another card for all future purchases online just in case.
Bottom line: Never assume that an online purchase will be free from foreign currency fees. When in doubt, pay with a card that doesn’t charge foreign currency fees.