When my husband and I started dating, he had no idea that I had credit card debt. He, fortunately, did not have any debt. In fairness to myself, I was working hard to pay off that debt. But as the years passed (six to be exact) and we neared our wedding day, I somehow still had credit card debt! He still did not. I believe I had at least a few thousand dollars on the cards at the time of our wedding. I was lucky in that my new husband wasn’t deterred by my spending problem. Although I know he wasn’t thrilled with it either. I say that I’m lucky because money problems are one of the biggest relationship crushers out there but we muddled through to that golden moment of debt-freeness. Couples and credit cards can mix as long as both parties are willing to communicate. So before you get too involved or if you are already with your partner for the long haul, you should really ask yourself and your loved one these basic but somehow much overlooked questions about their credit card habits.
You, Your Partner, & Credit Card Ripple Effect
Do you know how many credit cards your partner has in his or her wallet? Is it one, two, ten…? Generally speaking, the more credit cards a person has, the higher of a balance they carry. So, if your partner is carrying a balance on his or her credit card from month to month, they are most likely paying the interest fee, which is usually an insanely high percentage anywhere from 10 to 25% and up! Ouch.
Let me illustrate how much money your honey could be hemorrhaging out. Let’s say that s/he has $4000 in credit card debt (assuming this is all on just one card), the interest rate is 18%, and s/he is only making the minimum payment on the card every month, which is usually a minuscule amount. Let’s say the minimum payment on this card this month is $100. Here’s some interesting calculations:
- 62 months or just over 5 years is the amount of time it will take him/her to pay off this credit card only making minimum payments
- Making only the minimum payment until you pay off the card will result in your partner paying an extra $1423.14 in interest
Not paying the balance in full every month really adds up in interest payments. Ask yourself, or better yet, ask your partner what they could do with $1423.14. Pay rent? Pay two rents? Live off of it for a month? Complete their emergency fund? Invest in an index fund? Use that money to make an extra small payment on their credit card bill every month!
Even though you may not be affected directly from your partner’s credit card debt, say you don’t actually help make payments on the card, you are probably still affected indirectly. I like to call this the ripple effect. Your partner is obviously having problems coming up with the money to make payments in full, so they may need money in other areas of their life. Does he or she ask you to pay when you go out for meals or drinks every time? Does he or she ask you to buy them clothes or trips or whatever? Perhaps they are even asking you to make payments directly to their card? Their money foolishness, or to be a bit nicer about it, their lack of money know-how, will eventually cost you money, too.
Your Partner’s Pay-off Plan
All of this said, there is a solution. It is so simple that some people can’t bring themselves to believe it. I tend to take the more drastic approach. First, sit your honey down and explain that you worried about their spending habits because it is starting to affect you, too. You should let them know your concern about your future together, financial and otherwise, so-much-so that you want to work together to get him/her out of credit card debt as soon as possible. Then tell them that you are full of support and a little tough love which will help you crush the debt together.
Now comes the part where you really WOW them because you already have a plan in place. Again, I am drastic, so I would say let’s take a look at all of your credit cards, literally. Then I would pull out the scissors and ask them to cut them up! Eeek! Scary for them- really, I know, but after the initial shock has worn off is super liberating.
Then, I would help my better half write down the amount owed on all the cards. Depending on how many cards, what interest rates, and how high of balances they have, I would suggest one of two steps for them to take:
- If there are a lot of cards with high interest rates, consolidate all of the cards to one with 0% or a low percentage interest rate. This will save some money overall. Plus, it will be a morale booster if there is only one bill to pay instead of five or however many.
- If it is not worth consolidating the cards, then I would explain the ‘snowball’ payment method. This is also a morale booster in that your partner will begin to see results fairly soon.
- After they pay off each card, your partner should then close the account. Yes, this will ding their credit score, but not for long and definitely not forever. It will just take a little time to build the credit back up.
So, let’s recap our plan:
- Have a chat with partner about doing away with credit card debt
- Help partner cut up credit cards
- Either consolidate cards with to a 0% to low-interest rate card or start snowballing
- After each card is paid off, close the account
- Celebrate your partner’s new debt-free lifestyle
- Start saving an emergency fund (okay, I had to add this one last step. Always plan ahead for your financial future!)
ESL Couples & Credit Cards
Regarding your credit card information. Make sure you truly trust your partner before you hand over passwords, credit card numbers, etc. I know someone who allowed his then partner access to all of this personal information and she went wild. Racked up huge bills from spending. It was not pretty. Of course there will come a time when you will feel comfortable with sharing this information, but until then be careful.
Having both partners in a relationship that are debt-free makes that union so much stronger. You feel like you can conquer the world together. The freedom you get from not owing money can only be felt firsthand and let me tell you, it’s a rush! I know you and your partner will find that freedom sooner rather than later.
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