I owe a substantial amount on credit cards and am trying to pay it down.

My wife has no idea that the balance is so high as the cards are in my name only and I make the payments.

I am 69 years old and am concerned about passing this debt to my wife in case of death before I am able to pay it off.

Would she be responsible even though she did not co sign for the cards? Practically all of our assets are in her name.

Assuming that she would be liable, what do you think about a term life policy to cover the debt? I am in pretty good health and should have no trouble qualifying for at least a standard rate.

Thanks for your question JWC.

Yes, your spouse will most likely be liable for your entire debt if you were to pass away. I say most likely because the laws in each state can vary. That is something you will have to ask an attorney in your state.

Now, with that said, please consider the following options to resolve your situation.

1. Term Life - Term life is a great stop-gap, but please don’t stop there. You do need to know that you’re covered in case you die before you can arrange to pay off your debt.

   Make sure your coverage amount at least provides for your current debt plus your funeral expenses.

2. Speak with a debt negotiation expert - Debt negotiation experts can literally save you thousands of dollars and help you pay down your debt faster.

   In some cases they can reduce your debt to as little as 40% of what you owe.The downside is, they will close your credit accounts in order to negotiate.

   This will lower your credit score. It may mean that it will take a year or two for your credit to return to it’s previous number.

3. Speak with a lawyer that specializes in estate planning - In the event that you are not able to pay down all of your debt before you pass away, an estate planner can help you protect your assets, and your wife.

   You should be able to have a free consultation with a law office in your area.

Remember that it is never too late or too early to start planning your estate. Even if you think you don’t have much to pass on, there are a variety of ways to ensure that your assets (and your wife’s) stay in the family. An hour with a lawyer who specializes in this will set your mind at ease.

As far as debt negotiation experts go, I highly recommend Sam Sky. We had an interview with him several weeks ago where he discussed the different debt negotiation options.

Sam has promised that he will respond to any reader questions we send him about debt negotiation.

You can contact him about your specific situation here. Sam will go over your options, and show you how he can help you get out from under your debt.

How Long Can A Merchant Wait To Charge Your Credit Card?

We had two readers, Adam and Alisha, who wondered how long a merchant can hold a transaction before charging your credit card:

How long can a retailer wait to charge my credit card? I saw a purchase on my credit card in Feb.

However I did not make any purchases at this store in Feb. I think my husband may have made a purchase in early to mid December, but nothing in Feb.

I called Visa and was told that I would have to call the individual bank that issued my credit card in order to get that answer.

I don’t know which cards you have, but in order to know for sure, just call the number that’s on the back of your credit card. Ask them how long a merchant can hold a transaction before putting it through your account.

Also Alisha, in your situation – If you do not recognize the charge on your account, it could be a case of identity theft.

Talk to your husband. Ask him if he remembers the charge. If he does not, then the best policy is to be careful.

Call and cancel your card, and dispute the fraudulent charge. It really is better to be safe than sorry. Identity thieves occasionally charge a small amount to a stolen credit card – just to see if the charge goes through. If the charge does go through, they go on to use the credit card for larger amounts.

Thanks for your questions!

If You Pay Your Credit Card Balance In Full, Can You Negotiate?

A reader, Sherry, asked this question:

We will be getting some money from the sale of a house soon (but we’re practically giving the house away due to the economy).

We owe $27,000 in credit card debt (most of it used to refurbish the house). By paying the debt in full will credit card companies give you a break, like a percent reduction in what you owe? Anything? Any advice?

Thanks,
Sherry

Sherry,

Yes, when you make a lump sum payment like that you can usually negotiate to reduce your total balance before you pay it down. However, in some states the forgiven amount is taxable, so be careful of that.

I would definitely recommend that you speak with Sam, our resident Debt Negotiator. His company has a record of making lump-sum settlements at drastically reduced amounts. In some cases he helps people settle for less than half of the total amount they owe.

You can ask him your questions, and find out whether or not debt negotiation can reduce your debt by filling out a short form here.

I do not know of any way to negotiate the total debt on a credit card without closing out your credit accounts though, so be warned of that before you start.

If you are going to do the debt negotiation yourself, make sure that you get everything in writing. Otherwise you may find that the company ends up selling that portion of your debt to a collection company, even though you made a settlement with them.

Also, if you do the negotiations yourself (or possibly with some negotiation companies – I’m not sure about Sam’s policy) it may be necessary to go past due on your credit accounts for a least a month. This is because it’s usually only the collection department that is trained to negotiate debt.

If you have any more question about the process, please feel free to come back and ask.

Thanks for your question!

Have a question for us? Leave a comment below!

Keep Reading and Grab Our Free RSS Feed:

• Credit Card Debt Negotiation or Debt Settlement
• Credit Card Debt Negotiation – Not All Opportunities Are Created Equal
• Identity Theft. It Can Happen….To Me.

A reader, J., had this question

My credit score is significantly lower than my wife’s (medical bills). She put me on as a card holder on one of her credit cards that’s in her name. Does my lower credit effect hers if I’m on her credit card account? Thanks.

J.

Thanks for your question J.

There are some specific guidelines that couples can follow in order to protect each others credit scores.

Authorized Users on a Credit Account

If the credit account is in your wife’s name, and you are an authorized user, then it can actually raise your credit score, and it will not lower hers.

As long as your wife makes her monthly payments on time, and keeps the balance on the shared account below 30% of her available credit, then this card will raise both of your credit scores.

However, if she pays late, or uses too much of the available limit, then that account can damage both of your credit scores.

Medical Bills

You are concerned about your medical bills impacting your wife’s credit. As long as her name is not on those bills anywhere, then they will never effect her credit.

Even if you were to open up an account, and add her on as a joint user, those medical bills would still not effect her credit.

Only the specific accounts (or debt) that you share with your wife matter to your credit scores. Anything that is only in one person’s name will never effect the other person’s credit.

Thanks again for your question.

What should you do if you think you’ve made a bad decision about which credit card to get?

A reader, Fred , had this question:

I have recently applied and paid for an Applied Bank secured credit card but today i found tons of online complaints on this company have i made a mistake if so what do I do?

Thanks for your question Fred.

When you app0ly for credit several things happen:

• The credit card company checks your credit score before o0ening the account – This creates what’s known as a “hard pull” on your credit report, and it slightly lowers your credit score.
• Once you get the account, the bank begins reporting your payment activities to the credit bureaus. In the case of secured cards, they usually report to all three credit bureaus (or at least two of the three credit bureaus) every month. This record of timely payment raises your credit score slightly each month that you have the account.
• Since this is a secured credit card, you do eventually get your deposit back when you close the account. However, closing the account can lower your credit score.

Why does closing a credit account lower your credit score?

When you close a credit account, it effects several parts of the formula that FICO uses to compute your credit score. The number of open accounts you have matters, as does how long your accounts have been open.

In your situation the very best thing you can do is to keep the card for a while unless you have horrible problems with them yourself.

Ever credit card company has records of bad behavior online. Every single one. No business is perfect. Banks that offer “bad credit credit cards” in general can take advantage of consumers a little more than banks that market to people with good credit.

Unfortunately, it is probably something you will have to deal with for a little while if you want to raise your credit score. You were smart to pick a secured credit card instead of a high-fee sub prime credit card. They offer much better terms.

Long story short, just make sure you keep the account open as long as you can stand to. Charge very little on the card each month (about 10% of your total available credit) and make your payments on time.

If you do this you will get the full benefit of having the card, and you will be able to move up to much better credit offers in six months to a year.

When you are ready to move on to better credit cards, make sure that you open those accounts up first, before you close this one out.

If it turns out that the company has treated you well instead of poorly, you can also ask them to convert your secured credit card to an unsecured credit card in the future.

If you do run into problems with the company, you can always close the account out. Just make sure that you open up an additional credit account before closing this one out. That’s the easiest way to manage and improve your credit score.

Thanks for your question!

Have a question for us? Leave a comment below!

I am married and I used to be the primary card holder on our accounts. Over the years, we have found it easier to have my wife be the primary card holder as she is the one who pays the bills, handles credit card issues, etc.

Am I hurting my credit by not having a card with me as the primary account holder? Should I open one card in my name? Thanks, Jim

Thanks for your question Jim.

Yes, you are hurting your credit score by only having accounts with her as the primary card holder. FICO has been flip-flopping back and forth on the issue of whether or not authorized users count where your credit score is concerned.

The best thing you can do if you want to raise your own credit score is to open up at least one, if not two revolving credit accounts. Charge a very small amount to them each month and pay it off.

The idea is basically just to get a couple of cards that report to all three credit bureaus, make very small purchases and pay the cards in full each month. This will raise your credit score over time, and you will avoid paying any interest as long as you pay the balance in full on time. It’s like raising your credit score for free as long as the card doesn’t have any annual fees.

You could always get a gas card that offers cash back, or gas rewards. Or a travel reward card that gives you airline miles. It is one more thing to manage, but it is always smart to make sure that your personal credit score is as high as it can be. If you aren’t the primary card holder, then your credit score will not go up.

Two or three credit lines (total) are the suggested guidelines for raising your credit score, but they do not all need to be credit cards. If you have your name on the mortgage and auto loan, then one credit account in your name is probably enough.

Once you get your credit card, wait a month or two and check your credit report. You will want to do this to make sure that your credit card is reporting to the credit bureaus as agreed. If the card isn’t reporting positive monthly payment, then it isn’t doing you any good.

You are entitled to one free copy of your credit reports each year. Do wait a couple of months before checking everything though, because it may take that long for the credit bureaus to update your credit records.

Also, make sure that you check all three credit reports, not just one of them. when you are ready you can do this by visiting AnnualCreditReport.com. That’s the only place to get truly free credit reports from all three credit bureaus.

Thanks for your question!

When is the best time to negotiate with your creditors?

Should you try to negotiate your debt with your credit card company, or wait until they sell it to a collection agency? A reader, Vicki, had this question:

I was reading this site and giving me good information regarding do it yourself credit settlement with credit card company regarding payment plan.

Do it need to wait for a collection agency or i can call them now to a collection department, sorry just into a financial crisis and its too over-whelming.

I will try to do it myself so i dont have to pay to much fee to other company which charge 15% fee of what i owe. I was just thinking that i might as well pay that fee to credit card as my payment. that i think make sense to me.

Thanks, Vicki

Thanks for your question Vicki!

You should go ahead and negotiate with your credit card company. Do not wait until they sell your debt to a collection agency.

If you wait until they sell your debt it will seriously damage your credit score. If you negotiate with your credit card company now, they can still help you reduce your interest rate or lower your payments, and it will not damage your credit as badly.

As long as you are talking to someone in the collections department of your credit card company, they can negotiate with you just like a collection agency can.

The only possible exception is if you want to do a debt settlement for a drastically reduced amount of your total debt. If that’s the case, then usually a collection agency, not your credit card company, is your best bet.

If you can afford to make any sort of payments, then deal with your credit card company first. That is always going to be the best thing to do.

Thanks for your question!

Have a question for us? Leave a comment below!

Thanks also to these carnivals for featuring our articles this week:

• The Eleventh Edition ~ Book Review Blog Carnival @ Linus’ Blanket.
• Carnival of debt reduction @ Green Panda Treehouse
• Carnival of Everything Money #2 @ The Penny Daily
• millionaire mind and making money online @ Millionaire Blog
• The Money Hacks Carnival at One Million Bucks
• Road to financial independence @ One Family’s Blog

My husband and I are looking to purchase a new home – honestly, i know we can afford the payments, they are not that much more than now.

I have put away all of my credit cards and stopped using them for about 4 months but owe about $18,000.00 on them. They are all in my name, and my husband does not know that this debt exists.

Will he find out about my debt if I take care of all the bank information and warn our banker not to mention it to my husband? Roni

Dear Roni,

Thanks for your question! I’m not even going to touch on the right or wrong of this – different strokes for different folks. Not every couple manages their money together.

So, will he find out? Yes, probably. Especially if you get rejected for the loan based off of your existing debt. If you are really serious about buying this house, then you’ll want to do your homework first.

Check your credit score, and his

If either one of you has a credit score under 750, (and maybe even then) your outstanding debt is certainly going to come up, and may even be the basis for a denial of your loan application.

Lending policies have tightened up with the rest of the economy – It’s a good time to buy a house if you have great credit.

If you don’t it’s going to be like getting stuck under a very hot microscope.

So, check your credit scores to see where you stand.

Next, get all of your paperwork together, and call a banker that you don’t plan to use. Tell them what your credit score is, and ask them exactly what you asked me. Ask them what you should do. Or, call the banker that you do plan to use, and explain the whole situation.

If you both have great credit scores, and you can warn your banker beforehand, then you *might* be able to skate by on this. You are certainly going to have to be pro-active though, or it’s going to come up. It’s probably going to come up anyway, so be prepared for that if you are serious about borrowing money for a house right now.

Wish I could give you better news – thanks for your question.

Advice I wish I had when I was 22:

A reader, Chelsie, wrote in with this question:

So, I’m 22, I’ve got pretty good credit but since I’ve not had a steady job for more than a year i need a co-signer for a $6000 loan. If everything goes smoothly for paying back the loan, does it improve my credit score or only my co-signers?

I read an article where sometimes a co-signer will start a pattern of banks asking for co-signers. how can I get good credit if I can’t even get a loan without a co-signer? Chelsie

Hi Chelsie, those are good questions.

Yes, if you get a co-signer then everyone (no matter how large or small the loan is) is going to want you to get a co-signer from now on. Your next apartment, your next car, everything will require a co-signer, or be more difficult to get without one.

Now, if you do get a co-signer, then the loan will raise your credit score, if you do things right. If you can’t afford to pay back the loan at any point, you will ruin your co-signer’s credit. They are also liable for the debt if you can’t pay, so think carefully about who you obligate to that. Things like this can split families, and I’m not kidding!

The best thing that you can do in this situation is to keep looking for work, and put off the loan if possible.

The best ways to raise your credit score when you can’t get a loan are pretty simple. I’m going to give you a quick rundown, with links to the specific articles that explain how to do it:

• Clean up your credit report - Some of the negatives on your credit report can be slowly removed. This will raise your credit score.
• Get secured loans - You can either start using secured credit cards, or use a CD to secure a loan, either one (or both) will help raise your credit score.
• Check into pre-paid credit cards - Once you have a regular job, you can set up a pre-paid credit card to use like a debt card. For a small fee (about $10/month) these pre-paid credit cards will report to all three credit bureaus for you, and you can raise your score that way too.
• Keep your credit balances low, and make your payments on time - This is one of the most important ways to raise your credit score. Keep your balances under 30% of your available credit (the lower the better) and never be late on your payments.
• Rinse, Repeat - Cleaning up damaged credit is a lot of work, time and sometimes aggravation. But it works. Be persistent. You don’t want to spend the next 8 – 10 years of your life dealing with damaged credit, or worse, heading into bankruptcy because you can’t afford the loans that you have.

Thank you so much for your question Chelsie, I know you can do this! Even if you end up having to co-sign on this loan, just make sure that you get a steady income, and still take the credit repair steps. You will thank yourself in about five years when you are ready to move forward in life and you have a high credit score to help you do that.

Have a question for us? Leave a comment below!

Keep Reading:

• Do You Lie to Your Spouse About Your Credit Cards?
• Make A Statement (On Your Credit Report)
• Can Your Spouse Hurt Your Credit Score? The Good, The Bad, And The Ugly

You Can’t Make This Stuff Up

The name of the most economical family in the United States is…the Economides. Coincidence? The article describes how the family of seven gets by on $44,000 a year, with no debt. Two things jump out at me. First $44,000 is a very little amount of money in the United States for family of that size. Their frugality must be epic. Second, they do not even hold a loan on their house, a practice which may actually hurt them.

Lessons From Their Epic Frugality

They shop at discount stores, where the goods are the same, and the prices are a fraction of other retailers. This is a fantastic practice since really, only you know where you bought the item. They explain that they always ask themselves if they really need something before purchasing it. When they do make purchases, they seem to make saving money a game rather than a chore. Buying used cars with cash is another great habit that I have extolled.

They relentlessly plan their meals around coupons and specials. I imagine they rarely, if ever eat out. While I can’t say that I plan meals that meticulously, I almost always use coupons when I eat out. If $44,000 if all they have to live off of, then budgeting everything must be the only way to go.

Owning A Home With No Debt, A Good Idea?

I have always learned that it is actually good to have a mortgage on an appreciating asset, like your house. The article states that they purchased a house for $200,000 that is now worth $700,000, and that it is almost paid off. A home is the rare instance where debt works in your favor. By paying off their house, they loose out on the mortgage interest tax deductions, and are unable to leverage their purchasing power. Their money is now tied up in their home.

Only Using Cash

The article describes how they only pay cash for everything. I would think that a family with this much self control ought to be able to use their credit cards for charging day to day items and earning rewards. Many people, like myself, are far less frugal than they are, yet I earn rewards from my credit cards without paying any interest on my charges. Even better, my money stays in my interest checking account for up to 45 days from when I make a purchase until when it is paid off. I earn interest instead of paying it. I would love to know why such a frugal family does not do that.

Pennywise, But Pound Foolish?

With those kind of economic skills, I wonder why they are only earning $44,000 a year? Indeed, the article indicates that they are publishing a book on consumer finance, and that they also have a website. Unfortunately, as of this writing, their web site, www.homeeconomiser.com was showing a an error message. It appears as if publicity from this article generated so much traffic that their web server couldn’t handle it. Anyone who knows the basics about internet businesses will tell you that web site traffic translates directly into income. Perhaps if they had not been so frugal in finding an internet hosting company, they would be raking it in now.

What About The Opportunity Costs Of Extreme Frugality?

Another aspect of their lifestyle that I would question would be their time management. By spending so much time looking for bargains and budgeting their expenses into 19 separate categories, are they missing opportunities to increase their household income?

For example, I try not to spend time clipping coupons and endlessly rummaging though bargain bins that I could spend either earning money or increasing my earning potential. I have found part time work doing things I enjoy (like writing this column) to earn extra money.

I am also a firm believer in putting a value on your free time. If cutting coupons does not save you more money than your time is worth to you, why bother? While the article does not mention what line of business they are in, pursuing additional education would likely increase their earning potential. Potentially, this would produce a greater net benefit than some of their time consuming penny pinching.

Ultimately It Is About What You Want From Life

I have no problem with frugality. I once lived extremely frugally. I rented out a microscopic room in a run down house and I didn’t even own a car. That time was called college. When I graduated, I made the concious decision to optimize my finances to maximize my ongoing enjoyment of live. I have no doubt that I could go back to living off a minimal budget, but I have come to realize that I wouldn’t be as happy. I simply do not want to live my life obsessed with the cost of everything. It is not that I lack self control, it is that I prefer to make financial decisions that balance my frugality with other goals in my life.

The Good:
If you and your spouse go in together to get a home, car, or personal loan, then both of your credit scores will factor into the bank’s decision. In this case, your spouse’s score does affect the bank’s decision, but it does not actually affect your own score.

The best advice in this scenario is to have the person with the lower credit score take the time to raise their score before applying. If this is not possible then consider just having the person with the higher credit rating apply for the loan on their own.

You can also list each other as Authorized Users on your credit accounts. If you keep low balances, and make timely payments, then both of you get to have the advantage of boosting your credit through sharing your accounts.

The Bad:

Combining your credit accounts with your spouse does open you up to some risk if things in your marriage start to go sour.

Authorized user accounts are one example of a situation where your spouse can damage your credit score, and you can damage theirs.

When you list your spouse as an “Authorized User” you are assuming the responsibility for any charges they make on your credit card. If your spouse is angry with you, or you are going through a divorce, then the best thing to do is remove your spouse’s name from your credit accounts immediately. Otherwise you will have a legal obligation to repay whatever they charge. If they charge more than you can pay, or go over the limit, you are the one liable for the payments, not them.

The Ugly:

When Your Spouse Takes Off With Your Credit Cards:

If you are going through a messy divorce, or a heated argument, and your spouse has taken off with your credit cards, then you need to treat this as identity theft. If you do not, then you are liable for any charges that they make, and you do have to pay it back.

An un-authorized credit-happy spouse can not only cost you thousands of dollars, but they will cost you your good credit rating as well! If your cards are ever charged above 30% of their total limits you can expect your credit score to drop.

When Your Spouse Takes Off With Your Social Security Number:

It’s sad to say, but there are a whole lot of people out there who have had this happen. They get a divorce, and the next thing they know, they are being turned down for credit. What they did not realize is that their ex spouse used their personal information to open up credit accounts and get loans.

Again, this is identity theft. No matter how much you might want to care for, or protect the person, this is identity theft. You can either accept what they have done, and foot the bill, or you can report it as identity theft and press charges if you need to. There really are no other options.

Also, if you accept the theft of your information, and continue paying the bills for your spouse, your credit rating will suffer. This will not only cost you whatever amount of money they borrowed in your name, it will cost you thousands of dollars in additional interest on your future loans or mortgages because of your damaged credit rating.

Have a question for us? Leave a comment below!

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He thinks they have a great credit rating because he occasionally takes out “Six months same as cash” deals on furniture or electronics.

I know that they have a great credit rating because she has six credit cards that she’s had for years, and always makes the payments on time.

I dread the conversations where he advises me “All you have to do is take out a few six months same as cash loans, and then pay them off – it worked for us!” Inwardly I groan. We’re repairing our credit after bankruptcy, which is a serious ordeal. I don’t think a few six-months-same-as-cash loans (which we qualify for in our dreams) is going to fix anything for us.

So, I grit my teeth and cry a little inside. Not just because I know better, but because realizing their true situation makes me a party to the lie…

Yes, paying off those loans probably helped them, but it’s the wheeling and dealing going on behind his back that makes up most of their score. So I was thinking about it, and I wondered, “Is this normal?”

I mean, in our pre-bankruptcy days, I’ll admit that I occasionally made purchases and did not inform my spouse of the amount, but I was the one that handled the money.

So, does my family member who’s hiding her cards feel the same way? She handles the money, so there’s no harm done?

After we declared bankruptcy my husband and I made a promise to be honest with each other, and to both try to handle the money together so that we really could have a fresh start.

So far, I’ve kept my promise. I don’t put much money on my credit cards, but when I do, my husband knows about it. I don’t give him the amount to the penny, but I do say “It was about $60” or whatever.

I think this policy has actually helped our marriage, and we have better control over our money than ever before. I can’t help but wonder though, are we the exception? Are you honest with your significant other about your debt? What about when you first met?

After I spent some time thinking about this, I surfed around a little online, to see what I could find. I came up with a few excellent articles that I wanted to share with you – in case you were interested too:

• Do you keep secrets from your spouse? – BeingFrugal.net
• Lies, money and marriage – what can you do? – Gather Little by Little
• Financial Infidelity is Rampant – MSN Money / Liz Pulliam Weston

So, how about you? Have you ever told a “white lie” to your spouse about money? Do you know of family members who lie to each other about credit card debt? Are you ever caught in the middle? Tell us about it in the comments section below – It’s fine to be anonymous.

Did you like this article? You can get our future articles for free! (Click here)

Keep Reading:

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Photo Credit: CommittedMarriage.com