You’ll finish this post understanding three things: the dangers of credit cards, ten steps to use credit cards to build your credit score and maximize reward points, and deciding how to or whether to use credit cards in your marriage.
Table of Contents
The dangers of credit cards
There are countless tragic stories of credit card debt destroying lives and marriages. You can find and read them for yourself with a quick Google search.
On the other hand, I credit how I used my credit card as the tipping point for earning a perfect FICO 8 credit score.
Credit cards do not create credit card debt; people do.
What matters in your marriage is whether credit cards encourage you or your spouse to spend irresponsibly. That’s the case with any argument against credit cards.
To make an informed decision about how to handle credit cards in your marriage, we need to start with what studies have found to be true in the overall average behavior of consumers.
Let’s start with the bigger picture.
Credit cards activate the reward center of our brains and drive spending, which explains why studies have found that people spend more when using credit cards instead of cash, up to 20% more. One study even found that people are willing to pay double the price of attending a highly desirable, sold-out NBA game.
None of this means that you or your spouse behave differently with credit cards than cash, but it’s worth discussing, and so are the credit card debt-driven headlines in the media.
Most credit card companies indeed make billions in interest and fees.
Interest is charged on balances not paid in full, an amount that now towers at over a trillion dollars nationally. Those who pay their balances in full and on time do not pay any interest or late fees.
Let’s take a moment to bring this back to your marriage. If you and your spouse can manage yourselves responsibly using credit cards, these sensational headlines are irrelevant because you won’t pay any interest.
Now, back to sharing the facts that may cause a pause for concern before using credit cards.
Credit card companies make money in different ways, much of which comes from what they charge merchants in transaction fees.
As a matter of fact, that is the primary driver of revenue for Visa, which does not profit from the interest charged on Visa-branded card payments. Those profits go to the card-issuing financial institution. These merchant fees add up.
All credit card companies make a profit from transactions. And these merchant fees add up to a lot, $126.4 billion made by credit card companies in 2022, to be exact.
Let's again bring this back to your marriage. Who cares if credit card companies make money as long as they're not making money on you. As a matter of fact, credit card companies split the fees they receive from merchants with us in the form of credit card rewards.
Just two more arguments against having a credit card.
Credit card companies charge high-interest rates. Couple this with making only the minimum payment each month, and you'll be in a world of hurt for a really long time.
Let's use the 2023 average credit card debt of $6,000 as an example and the average credit card interest rate of 21% that same year. As you can see, you'll pay nearly $10,000 in interest, and it will take you 297 months to get rid of your debt.
Let’s circle back to your behavior and your spouse’s with a credit card. If you pay your balance in full and on time, then none of this matters! You won’t pay any interest.
The final argument is that debt is dangerous. There’s no devil’s advocate for this: debt is dangerous.
But just because you have a credit card doesn’t mean that you’re in debt. You’re not in debt if you don’t use it. You’re not in debt on any transactions before the payment is due.
You’re only in credit card debt if you cannot pay the full balance when the payment is due.
Any loan product can be empowering or destructive to your personal wealth. It all depends on how you use it.
The bottom line is that responsible borrowing helps your future self, and I don’t know of any instances where credit card debt will help your future self.
Now, let’s dive into 10 straightforward steps to handling credit cards responsibly in your marriage.
Ten steps to use credit cards to build your credit score and maximize reward points
Step 1: Establish a mutual understanding of what a credit card is in your marriage: a credit-building tool that earns rewards. With this principle guiding your credit card decisions, you will inherently use the card more responsibly.
Step 2: Understand the Terms: The terms and conditions of your credit card are found in the Schumer Box. Know the interest rates, fees, and any rewards or benefits it offers.
Step 3: Create a budget and system that reduces the chances you will overspend using your credit card. The system should make good choices easy and bad choices hard. For example, do not allow your credit card information to autofill anywhere.
Amazon, social media apps, and any other online transaction will nudge you to save your credit card information, which makes it easy to spend in the future. Sometimes, the inconvenience of filling in the information each time is just enough pause to avoid spending impulsively.
Step 4: Pay On Time: Schedule your credit cards to automatically pay at least the minimum amount due by the due date. This should not be the primary way you make your payments; it’s simply insurance to ensure you never miss a payment.
Missing a payment triggers serious consequences: late fees, interest on the balance carried over, and, far worse, is the impact on your credit score. 35% of most credit scores are determined by whether you make payments on time.
Step 5: Never carry a balance to the next billing cycle. Paying in full ensures you avoid interest.
Step 6: We highly recommend using Tiller to track your spending to stay within your budget and to be on the lookout for identity theft.
Related Article: How NOT to Use Credit Cards: Couples Edition
Step 7: Pay your balance daily. This might sound like a radical idea, but I believe this is what got me over the hump to earn a perfect FICO 8 credit score. 30% of your credit score is how much of your credit you are using. This is called a utilization rate.
There are all kinds of myths out there about how low you should keep your utilization rate to build your credit score, but what is absolutely true is you want to keep it close to 0%.
Conversely, carrying a high credit card balance or maxing out your credit card has damaging consequences for your credit score.
Step 8: Use your cards strategically to earn rewards. I printed a handy graphic with our credit card rewards details for our wallets as reminders.
Step 9: Guard Your Information: Protect your card details and personal information. Be cautious when sharing details online and regularly update passwords.
Step 10: Decide what the credit card relationship with your spouse will be in your marriage, which is my final topic.
How to or whether to use credit cards in your marriage
Can you and your spouse manage your credit cards without going into credit card debt? Can you use them strategically to accumulate rewards? Can you pay the balance in full, ideally each day to build your credit score?
If following through with what it takes to use your credit card to build your credit scores and accumulate rewards then this will be an easy conversation with your spouse.
If you’re concerned that this is something you would struggle doing, or your spouse would struggle doing, this is an entirely different conversation.
The act of getting married won't alter your credit history or directly affect your credit scores. You also won't immediately take on responsibility for paying off your spouse's existing debt.
However, there are decisions commonly made by married couples that do impact your credit reports and credit scores. To make it easy, let's break these options into three categories: Individual accounts, authorized users, and joint accounts.
Related Podcast Episode: How to Build Your Credit - An Interview with Experian's Rod Griffin
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Individual accounts
You and your spouse can maintain separate credit card accounts. This prevents your spouse's credit card behavior from impacting your credit score, and vice versa. Unfortunately, this does not prevent the consequences of poor credit card management from impacting your marriage.
In most marriages, it's not your money and my money but rather our money, so your credit card debt, or your spouse's, can still play a role in your overall household finances, even if you have your own credit card accounts.
Authorized users
An authorized user is someone who's been added to a credit card account by the card's owner, also known as the primary cardholder. The authorized user can make purchases with the credit card as if it were their own.
It is not uncommon for spouses to add each other as authorized users on existing accounts. This can make a lot of sense for folks who want to preserve their length of credit history with their credit cards, which is 15% of a credit score.
The risk falls on the shoulders of the cardholder if the authorized user is an overspender. That's because the responsibility to pay any charges remains with the primary cardholder, and overspending leads to higher credit card balances, which will hurt your credit score.
Here's an example. Assume you have your own credit card account you opened before marriage, and you add your spouse as an authorized user. Your spouse decides to overspend using your credit card. A week passes before you look at your balance and notice the card is nearly maxed out. Your credit score will be damaged as a result, and it is your responsibility to make the payment.
Joint account holders
Sometimes couples decide to open a joint credit card account after marriage. Joint credit cards allow two people to share one account equally — both account holders are responsible for paying card charges and will have any debt from the account reflected on their credit reports.
Once again, this is a problem if one spouse manages credit cards poorly. The primary difference is that both spouses will now be responsible for making the payment and the credit scores of both spouses are on the line.
The image below exhibits the differences between an Authorized User vs. a Joint Account Holder.
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