Marriage, Finances, and Credit Cards

Finances in marriage are often cited as a primary source of couples’ conflict and a leading cause of divorce. Many experts suggest joint accounts when asked how to manage finances in a marriage, the theory being that joint ownership will lead to more communication, which, in turn, leads to better conflict management.¹ My research – and experience – suggests the truth is not so simple.

A comprehensive University of Wisconsin-Madison study found that money was far down the list in terms of the number of marital conflicts it causes – after children, chores, communication style, and how to spend leisure time. But money problems had greater significance. In the study’s words: “Marital conflicts dealing with money were longer, especially recurrent, and held higher present and long-term significance to partners’ relationships than other conflicts.”²

In my interviews, the picture that emerged about how to maintain marital harmony while managing finances was to discuss it continually in order to develop deeper understanding of your finances and more satisfying compromises. Whether couples maintained separate or joint financial accounts was nearly irrelevant. For example:

• I spoke to millennial couples with separate accounts who used mobile apps to send each other money to “true up” their payments for rent, mortgages, groceries, and other household expenses. That process required them to be talking about their spending more or less constantly.
• I also spoke to older couples whose finances were all held jointly – but one of them took responsibility for “the bills” and little discussion took place, so joint accounts don’t always result in better communication about marriage finances.

For some couples, the answer to this question is “yes.”

While for most married couples the question of separate or joint checking and savings accounts breaks down along the generational divide, I ran into a few who opted for “all of the above.” My wife and I – and every couple I know our age – have joint accounts; my married kids and most couples I spoke to their age have separate accounts. But some had joint accounts plus their own separate accounts – and they’re not alone, according to Investopedia.³

The challenge here is how you use these core tools – checking and savings accounts – to manage joint finances, including debt, short-term household expenses, and long-term financial goals like saving to buy a home or for retirement. Each approach has advantages and disadvantages.

• Separate accounts: Each of you keeps all your own money in your own account, and you share expense payments in whatever ratio seems fair to you. Some couples split them evenly, while others split in proportion to their different incomes. The main advantage is your spouse can’t look over your shoulder – your spending habits are your own. The disadvantage is it can grow to be a lot of work to figure out who owes how much to whom on an ongoing basis – a workload that could grow beyond reason if children enter the picture.
• Joint accounts: Both your incomes go directly into the joint accounts, out of which you pay all household expenses and agreed-to amounts for savings. Sounds simple – and it is. The downside for some, though, is resentment can build if one partner brings a lot more income than the other or has a different approach to discretionary spending versus savings.
• Joint plus separate: Here, your options are to deposit both your incomes directly into the joint accounts and transfer an agreed-to amount to your separate accounts, or vice versa – you keep your money in your own account and contribute a set amount to the common family budget every month. The advantage here is the combination of simplicity and freedom. You don’t have to worry about who owes money to the other because the family bills are paid from the joint account, but your personal spending can remain private. The downside is more accounts to manage.

Though commonly asked, this is usually a misleading question. Almost no card issuers offer joint credit cards anymore. The real question is whether to have separate credit card accounts or have one of you be the primary account holder and the other be added as an additional card member, aka authorized user.

The main issues between those two approaches are fairly similar to those for joint bank accounts. Do you care to keep your spending private? Are you OK with having more accounts to manage? The people I spoke to do it various ways:

• With one couple, one spouse owns all the credit card accounts and the other is an authorized user on each.
• In my house, I’m the account holder on our standard credit cards and my wife is an additional card member, while she’s the account holder for about half our store cards – we have six!
• The millennials I spoke to have separate credit cards with one exception: One couple has a joint card in her name with him as the additional card member. He told me: “If I go out to lunch at work I use my personal card, and if I’m buying groceries on the way home I use the joint card.” Having extra accounts to manage doesn’t seem to bother them – but that’s a personal choice.

Experts prefer a clear approach for two out of three of these typical kinds of debts that married couples encounter:

• Mortgages: Most couples put both their names on the deed to the property and hold the mortgage jointly. Their home is usually a family’s most valuable asset.
• Auto loans: Experts say auto loans should generally have one name, and it should be the person who expects to drive the car more. This is due to the way liability works in case of an accident – only the driver and the owner of the vehicle can be held liable.⁴
• Personal loans: This is the one that can get tricky. Whether to apply for a personal loan solo or jointly can depend on many factors, such as the differences between your credit scores. If one is very high and the other very low, it may be best for the high scorer to go it alone. On the pro-joint side, two incomes may increase the amount you can borrow, and good payment practices benefit both your credit scores. On the pro-solo side, you’re both responsible for the full amount in a joint loan, which could be an issue down the road if you split up or someone dies. And poor payments and defaults would hurt both credit scores.
  

It’s important to know that there’s no such thing as a joint credit score. Your score is tied to your Social Security number and is yours alone. But if you have jointly held debts, they affect both your credit scores. That’s a mutual benefit if payments are consistently made on time and, of course, a mutual detriment if they’re not. For more, see “What Affects Your Credit Score?”

When it comes to marriage and finances, people tend to think first about whether to hold joint accounts or keep them separate, whether for checking and savings, loans, or credit cards. But in reality, either approach – or a combination – may be best for you depending on your and your spouse’s personality and preferences. The key to maintaining monetary harmony in a happy marriage is to talk often about your long-term and short-term financial goals and preferences, no matter how you structure your marriage’s financial logistics.