Divorce has a way of affecting unexpected areas of people’s lives. People preparing for the end of a marriage likely understand that they may need to have some difficult financial conversations in the near future.
However, they may be unfamiliar with the specific ways in which divorce could affect their finances. Credit cards are sometimes partially to blame for marital issues. Disagreements about how people use credit can put a lot of strain on marital relationships. Discovering hidden debt can be a devastating blow that damages the trust between spouses.
Not only can credit cards potentially contribute to divorce, but they can also complicate divorce. People preparing for divorce need to be aware of the three common credit card issues explained below.
1. A sudden loss of revolving credit
People preparing for divorce frequently choose to open a new credit account solely in their own name. They do this because shared accounts are often subject to closure or court orders freezing the account immediately after one spouse files. At the same time that people need to pay for a lawyer and establish a separate living space, they may find that they cannot use their usual shared lines of credit.
2. Disagreements about who pays
Most credit card balances accumulated during marriage are potentially part of the marital estate when spouses divorce. Each spouse can take responsibility for certain accounts, or one spouse might accept far more marital property and most of the marital debt.
Spouses may need to think carefully about their income, obligations and personalities. If the other spouse defaults or files for bankruptcy, they may end up responsible for debts that the property division settlement technically allocated to the other spouse.
3. Disputes about rewards
Better credit cards tend to offer valuable rewards for cardholders. Some travel cards offer multiple free plane tickets annually. Couples may have accrued hundreds or even thousands of dollars in cashback rewards. Those rewards are technically part of the marital estate that spouses have to divide at the end of their marriage.
Particularly in scenarios where one spouse has misled the other about their financial activity, used credit cards to fund an affair or spent maliciously immediately prior to the divorce, disputes about credit cards can complicate property division proceedings. Being aware of the challenges related to credit cards during divorce can help people prepare themselves effectively for the financial reality of this process.