TIME relationships

Why You Need to Talk About Your Partner’s Credit Card Debt

couple-talking-credit-card-laptop
Getty Images

This article originally appeared on Refinery29.com.

The modern dating scene is tough — we know that all too well. Finding a great partner feels like hitting the jackpot, so you might be tempted to overlook certain serious red flags in the name of love. But, what if you’re ready to take the next step with your partner and discover that he or she is deep in credit card debt? This is an issue you definitely shouldn’t dismiss — money is one of the main reasons couples fight. Failing to address your partner’s debt before you move in together or get married could cause heartache down the road. So, should you move forward or hit pause? Here’s how to decide.

Consider The Why
Discuss your financial situations. It’s important to get to the bottom of why he or she is dealing with debt. Asking specific questions about how the balance was incurred will give you a better sense of your beloved’s overall level of financial responsibility.For instance, did your partner face a major emergency that they didn’t have the cash to cover? In this case, the debt can be chalked up to an expensive, one-time event. It doesn’t indicate a pattern of irresponsible financial behavior. But, if your partner carries credit card debt due to reckless spending, you should give this some thought. If you budget carefully and live within your means, you might have a hard time coupling up with someone who doesn’t share your values.

(MORE: Why I Don’t Feel Guilty About My Credit Card Debt Anymore)

Consider The How
Next step? Consider how your significant other is dealing with the shortfall to decide if the relationship is worth pursuing. Even if a mountain of credit card debt is the result of frivolous spending, your partner may have realized the blunder. If your mate is taking steps to pay off the balance — moving to a smaller apartment, going out less, taking on an extra job — count these as good signs. Everyone makes mistakes, and working hard to correct a financial misstep means your partner is trying to get on the right track.However, if he or she seems unconcerned about the debt and isn’t making an effort to pay it off, you should take a step back. Credit card debt is a serious financial burden, and your partner should be treating it as such. Ignoring a lingering balance could signal a lack of judgment when it comes to money.

(MORE: Do You Really Need A Credit Card?)

In The End, It All Depends — But Tips Help
Money is a highly personal and emotional topic, so only you can decide if your partner’s credit card debt is a deal-breaker. The important thing is to discuss the issue before taking a major step in your relationship, and keep the lines of communication open. This will help you assess the direction of your partnership and keep you informed about how your mate’s financial situation is evolving.If you want to help improve your partner’s credit card habits, consider sharing these tips: Keep a budget and track your spending — this will keep you from spending more than you can afford to pay off. Pay your bill in full by its due date — you’ll stay out of debt and keep your credit score healthy. Never use more than 30% of your available credit — this will help you achieve and maintain good credit. Read your monthly statement carefully — you’ll be able to spot fraud if it occurs.

The Takeaway
Understanding why your partner is in credit card debt and how he or she is dealing with it is an important step to take before getting serious. Consider it one more stepping stone on the road to finding “the one.”

(MORE: How to Keep Your Finances Safe After a Breakup)

TIME Spending & Saving

5 Weird Reasons Your Credit Card May Be Declined

American Express, Discover, MasterCard and Visa credit cards are displayed for a photograph in New York, U.S., on Tuesday, May 18, 2010. Credit-card firms caught off-guard by U.S. Senate passage of curbs on debit fees are facing what one executive sees as a "volcanic" eruption of legislation, including possible limits on interest rates. Photographer: Daniel Acker/Bloomberg via Getty Images
Bloomberg/Getty Images

You might never see these major headaches coming your way

When President Obama mentioned that he’d recently had his credit card declined at a New York City restaurant, the news was kind of funny. The leader of the free world getting his card rejected? But all joking aside, it can happen to anybody, for any number of reasons. “I guess I don’t use it enough, so they thought there was some fraud going on,” the President said.

That’s actually a pretty common reason issuers will freeze a card, experts say. Here are some other unexpected reasons your card could be declined. Here are some others they say you should watch out for, so you’re not stuck standing at a payment terminal trying to explain, like Obama, that no, you really do pay your bills on time.

You hit the road. “[If] you make purchases the same day in distant locations — you buy breakfast in Toledo and then you’re shopping in New York that evening — your card issuer may not know you’re traveling and could decline the purchase,” says Gerri Detweiler, director of consumer education for Credit.com.

You’re paying a foreign company. If you’re traveling overseas, especially in a country where card fraud is more prevalent, or if you’re making a payment to a business based overseas, that could get your card flagged, experts say.

Your limit was cut. If you got a limit decrease on a credit card that you forgot about, or if you missed the notification, you could be denied if a purchase would push you over that new limit, says Odysseas Papadimitriou, founder and CEO of Evolution Finance. On a related note, if your card has expired and you’re not using the new one, you could be declined.

Your funds are tied up in a hold. Businesses including gas stations, hotels and rental car companies often put a hold for a certain amount — which can be hundreds of dollars — onto your card when you initiate a purchase, warns Edgar Dworksky, founder of Consumer World. “If you are near your limit before this, these temporary charges could put you at your limit, and subsequent purchases elsewhere will be denied,” he says.

You’re spending big. “A large purchase like electronics, appliances or an expensive vacation all could trigger a decline if it’s outside your normal spending pattern,” Detweiler says. Likewise, if you’re spending big bucks on luxury goods popular with credit card crooks like jewelry or electronics, your issuer might suspect fraud.

MONEY identity theft

4 Reasons Why You Should Shop at Stores That Got Hacked

141020_EM_CCBreachStores
Mike Blake—Reuters

Almost half of all consumers surveyed are afraid to shop at retailers like Target. They shouldn't be.

This post was updated with news about Target’s new free shipping offer.

Retailers are gearing up for the holiday shopping season, but one thing has some consumers spooked: According to a new survey by CreditCards.com, 45% of respondents say they are less likely to shop at stores that have suffered a data breach, such as Target, Home Depot, or Michaels. Almost 30% say they will “probably” avoid stores that have been hacked, and 16% claim they “definitely” will.

While it’s hard to believe that half of all shoppers will actually skip the sales at major retailers come holiday season, Target did suffer a 5.5% decline in transactions last year after its data breach.

But shoppers, you’re being silly. You don’t need to avoid stores that have been hacked. Here’s why.

1) If someone steals your credit or debit card number, you have very limited liability.

You’ve got at least one reason to thank Congress: The Fair Credit Billing Act and the Electronic Fund Transfer Act cap how much money you’ll lose if someone steals your credit or debit card. If someone steals your card number but not your actual card — which could happen during a data breach — you are not liable for any fraudulent transactions. Read: You won’t lose any money. Just be sure to report any fraudulent debit card charges within 60 days of receiving your statement.

The rules are a little different if someone steals your physical card. With credit cards, you still won’t need to pay anything if you report the loss before a thief uses the card. Otherwise, your liability is capped at $50. With debit cards, you’ll only pay up to $50 if you report the theft within two days, or up to $500 if you report the theft within 60 days of receiving your statement.

There’s another reason to prefer credit over debit. When someone makes fraudulent charges on your credit card, you can challenge the bill when you receive it. But when someone else uses your debit card, that money comes straight out of your account, so it could take a little bit longer to recover your funds.

And if you’re really afraid, just stash the plastic. CreditCards.com reports that 48% of shoppers say data breaches have made them more likely to spend cash.

2) Avoiding these stores won’t protect you from the scariest kinds of identity theft.

When someone steals your credit card number and spends your money, that’s considered “existing account fraud.” Banks and credit card companies have gotten pretty good at identifying abnormal spending patterns, so you’re likely to catch existing account fraud early, and your liability is limited.

But if someone steals your Social Security number, opens a new credit card in your name, provides a new billing address, and runs up big charges, it might take you a while to notice. That’s called “new account fraud,” and it’s a real headache.

To catch new account fraud, check your credit report three times a year. It’s not hard to do, and it’s free. Your report will show all your accounts and debts, as well as your payment history. Check to make sure all of the information is accurate and all of the accounts actually belong to you. (Go. Do it now. Did you catch a problem? Here’s what to do.) If you’re afraid that your social security number has already been stolen, you can put a free fraud alert on your credit file to let lenders know or freeze your credit so that no one else can open new accounts in your name.

But you don’t give out your Social Security number every time you swipe your credit card, don’t worry about going shopping.

3) Safer cards are on the way.

Are you sick of all these data breaches? So are businesses — after all, they’re the ones on the hook for fraud, not you. That’s why Visa and Mastercard are sending out new “chip-and-pin” cards. These cards have embedded microchips, which are more secure than magnetic stripes. If you’ve ever traveled abroad, you might remember what chip-and-pin technology looks like; Europeans have been using this system since the 1990s. While not foolproof, these cards are a great improvement. President Obama signed an executive order last week requiring that all government credit cards use chip-and-pin technology.

Practically speaking, chip-and-pin cards won’t do much more to help consumers at point-of-sale — remember, you have limited liability. But starting Oct. 1, 2015, the liability will shift to whichever business has the oldest technology. If credit card companies don’t update their cards, they will be liable for any fraud; if retailers don’t offer chip-and-pin terminals, they’ll be on the hook. So everyone has an incentive to make payment systems more secure, which is ultimately in consumers’ best interest.

4) Retailers that got hacked are working harder to win back your trust.

Guess which retailer is installing chip-and-pin technology in all of its stores and on all of its branded cards — Target!

Guess which retailer offered free credit monitoring to all its customers — Target!

Guess which retailer just started offering free shipping — Target!

Given that there have been 606 data breaches already this year, according to the Identity Theft Resource Center, you can probably expect more to come. But the retailers that have already been hacked are beefing up security and offering free identity theft protection services to consumers, so you’re probably safer there than everywhere else.

If that doesn’t put your mind at ease, here are some more steps you can take:

 

MONEY credit cards

Obama’s Credit Card Was Declined—No, Really.

US President Barack Obama tells a story about his credit card was recently declined at a restaurant
Saul Loeb—AFP/Getty Images

The president shared a story about his own credit card troubles during an executive order signing at the Consumer Financial Protection Bureau.

First, we heard that the former chair of the Federal Reserve couldn’t get a mortgage. Then we learned that one of the most powerful economic figures in the world makes less money than at least 113 of her underlings.

Now we find out that President of the United States had his credit card declined.

At an event at the Consumer Financial Protection Bureau today, President Obama said a New York restaurant rejected his card last month. But it wasn’t because he maxed out his credit (or so he says).

“I guess I don’t use it enough, so they thought there was some fraud going on,” Obama said. “I was trying to explain to the waitress, no, I really think that I’ve been paying my bills.”

The President made his remarks while signing an executive order to improve security features on government credit cards. “Even I’m affected by this,” Obama joked.

Luckily, Michelle picked up the tab.

Read on for more help with common credit woes:

Read next: Obama Signs Order to Secure Government Credit Cards From Data Breaches

MONEY College

This “Smart” Way to Pay for College Could End Up Costing You an Extra 3%

A senior at Western Kentucky University walks past flowering cherry trees on WKU's campus on his way home from class.
Western Kentucky University has one of the highest credit card surcharges. Alex Slitz—AP

A new study from CreditCards.com finds that colleges are increasingly adding surcharges for charging tuition. And these fees typically exceed any potential miles or cash back earned from your card.

It’s getting harder to turn junior’s college tuition bills into free vacations for Mom and Dad.

Wealthy parents have long tried to lessen the pain of paying their kids’ tuition bills by charging the costs to a credit card that pays rewards, with the hope of getting a bit of cash back or a roundtrip flight to Rome out of the deal.

But colleges are now making this strategy less profitable by adding fees for charging tuition, according to a study released Tuesday by Creditcards.com.

The survey of the largest public, private, and community colleges found that 90% of the 100 biggest public universities that accept credit cards charge convenience fees, and almost 70% of the 100 biggest private colleges. (Only 12% of the largest community colleges add credit card surcharges, but community colleges tuition tends to be quite low.)

In most cases, the fees now exceed the value of frequent flier miles or cash back that the parents can earn on a rewards card.

The average reward mile or point is worth less than 2¢, says Matt Schulz, senior industry analyst for CreditCards.com. Meanwhile, the average big college now charges 2.62% for processing tuition through a credit card, according to the survey.

And some schools charge much more. According to the CreditCards.com survey, the big colleges charging the highest fees are:

School State Type Convenience fee rate
Western Kentucky University KY Public 2.99%
Saint Joseph’s University PA Private 2.99%
Roger Williams University RI Private 2.99%
Kansas State University KS Public 2.90%
Ohio University-Main Campus OH Public 2.90%
Kent State University at Kent OH Public 2.90%
University of Akron Main Campus OH Public 2.90%
Bowling Green State University-Main Campus OH Public 2.90%

The Impetus for the Fees

Such fees have become increasingly common in the last decade. A separate survey last year by the National Association of College and University Business Officers had found that 44% of colleges charged a fee for using a credit card, up from 14% in 2003.

Colleges have been adding surcharges in part because they have come under pressure to pare expenses. And credit card companies charge all vendors—including colleges—for processing payments. In 2013, for example, MasterCard’s fees ran from 1.05% to 3.16%.

In addition, schools that do charge fees appear to be encouraging their competitors to follow suit.

“I get a lot of complaints from other schools” that charge fees, says Michael Reynolds, executive director of student financial services at Auburn University, which doesn’t add a surcharge. Reynolds says Auburn absorbs the surcharge—which he estimates at between 1% and 2% of the amount charged—as a cost of doing business.

He estimates that about half Auburn’s tuition bills are put on credit cards. In most cases, he says, it’s just a matter of convenience for the parent or student. But he added that some families do seem to be trying to build up rewards.

The Better Alternative for Most

The fees are just one of many reasons financial experts warn parents away from charging tuition.

Credit card interest rates are usually so high that parents who don’t have enough ready cash to pay off the bill immediately could end up paying thousands of dollars in extra interest, says Kevin Yuann, director of credit cards for NerdWallet.

Anyone who can’t pay cash up front for tuition would really be better off with federal student or parent loans.

Compared to the 15.66% average annual percentage rate on credit cards, federal student loans charge just 4.9% this year, after fees are added in. Parent PLUS loans have a total APR, including fees, of 8.1%.

The federal loans also have much more flexible repayment options, allowing borrowers to stretch out payments for up to 25 years or adjust the payments downwards if their incomes fall. Students working in public service jobs can also get some of their federal loans forgiven.

The Best Reward for the Rest

Absolutely sure you can pay off the big credit card balance quickly? Contact your school to find out whether there’s a fee for swiping.

While the majority have one, there are still several schools that do not charge students or parents extra. For example:

School State Type
Auburn University AL Public
DePaul University IL Private
St John’s University-New York NY Private
The University of Alabama AL Public
University of Nevada-Las Vegas NV Public

And then, assuming there is no charge, make sure you’re getting the most back you can.

Nick Ewen, a frequent business traveler who writes often on rewards at ThePointsGuy.com, says parents with lots of ready cash can turn tuition into valuable goodies.

One British Airways card, for example, offers a free companion ticket to those who spend at least $30,000 a year. And Southwest Airlines offers a year’s worth of free companion tickets to those who earn at least 110,000 points each calendar year.

Or, consider the winners of MONEY’s Best Credit Cards of 2014. The Barclaycard Arrival Plus World Elite offers two points per $1 spent and miles can be applied to your credit card bill to offset the costs of any kind of travel. Or if you prefer cash back, Citi Double Cash and Fidelity Investment Rewards American Express each give you 2% on every purchase.

With the latter, you can direct your earnings to a 529 college savings account—thereby reducing the amount you have to charge next semester.

MONEY credit cards

The Easy Way to Get 5% Cash Back on Everything You Buy

Handing cash back
Jamie Grill—Getty Images

Maximizing credit card rewards requires you to be tactical, but the payoff is well worth the effort.

More than half of cash back credit cards return just 1%, according to CreditCards.com. But you can do better—a lot better, in fact.

Being strategic about which credit cards you choose and how you use them can have significant payoff, we discovered while making picks for Money’s 2014 Best Credit Cards.

No one card will give you back 5% on everything you buy, but you can earn about that much on average if you, ahem… play your cards right.

1. Start with the right base

Groceries are one of American consumers’ biggest expenses, and they’re the only category where you can get 6% cash back—with the right card. That card is the American Express Blue Cash Preferred, which comes with a $75 fee and a $150 sign-up bonus. The Preferred also offers 3% on gas, so it should be used at the pump unless you can do better with any of the cards in the next section.

2. Add some flair

The Discover It, Chase Freedom, and U.S. Bank Cash Plus all have two things in common: They pay 5% on select rotating categories and they have no an­nual fees. So collect all three, and deploy them on which­ ever categories are highlighted at any given time. You can see below the benefit of adding them to your rotation.

The categories that pay 5% are predetermined on the It and the Freedom. But the Cash Plus lets you choose your own from a list of 12; so just make sure on that card to select your biggest expenses after groceries that aren’t covered by the other two cards’ rotating categories.

3. Have a “plan B” card

The cards above pay 1% on most other purchases. So don’t use them for your et cetera shopping. For those purchases, use the Citi Double Cash or Fidelity Investment Rewards American Express, which earn 2% on everything.

4. Use online malls

To get you to use your cards for online shopping, many card companies have created portals that give you access to your favorite stores for additional rewards. For instance, ShopDiscover was recently offering 5% cash back at Enterprise Rent-A-Car, while you could receive 5% back from Bloomingdale’s on Chase Freedom’s Cash Back Boost. That’s in addition to whatever you’d earn for those purchases normally.

5. Hire an assistant

The It and Freedom’s 5% categories rotate every three months, and you have to opt in to enjoy the discounts. Signing up involves only a click, but you have to remember to do so. Plus, with the U.S. Bank Cash Plus, the 5% cash-back category options can change. All this requires you to stay vigilant. Download the Wallaby mobile app to help you remember which cards to use when, and set up a Google calendar alert every quarter so you remember to sign up for the rewards in the first place.

MONEY Credit

3 Credit Score Myths that Could be Costing You

credit scoring myths
Canceling an old card won't necessarily impact your score—at least not in the way you think. Fuse—Getty Images

These common assumptions could take big points off your FICO score—and leave you paying more on loans and credit cards.

If you’ve ever turned to the Internet for the answer to a question about credit scoring, you probably ended your search more puzzled than when you began.

There’s a lot of misinformation out there. And FICO, the company responsible for the most often used scoring model, only reveals limited information about how the sausage is made—which doesn’t help matters. Plus, since everyone’s credit profile is different, there are often no clear yes or no answers to common questions.

With that in mind, here are three important credit half-truths that you need to understand. After all, the more you know, the higher your score is likely to be.

THE MYTH: Closing a credit card you’ve had open for a long time will hurt your score because the formula values a long account history.

People often hesitate to close credit cards they’ve had open for years because they think that doing so will shorten the length of their credit history—which FICO admits comprises 15% of one’s score. Not so.

“Closing an account with a good payment history does not cause you to lose the history for that account,” says Rod Griffin, director of public education at Experian. “Closed accounts with a zero balance that have no negative information in their history remain 10 years from the date they are closed.”

So if you have a long and healthy credit history, you won’t likely see an immediate, sharp drop to your score if you close an old card—at least not for reasons related to length of credit history.

But you might see a dip for credit-utilization reasons. “Losing the available credit limit on that card can increase your overall utilization rate, also called your balance-to-limit ratio, which can hurt credit scores, at least temporarily,” Griffin says.

A full 30% of your credit score is heavily influenced by your credit utilization ratio. Since many people have high limits on their older cards, closing one could drive up your credit utilization ratio—and drive down your score—if you’re carrying balances on other plastic.

This could do serious damage to your score, so the credit limit—not the age of the card—is what’s most important to consider before closing an account.

THE MYTH: Your credit score will be fine as long as you pay your balance in full every month

Staying out of credit card debt is important for maintaining a good credit score, so you might be patting yourself on the back for paying off your balance in full every month.

Not so fast. If you’re charging too much at any point in time, there’s a still chance your score could suffer.

As discussed above, 30% of your credit score is heavily affected by your credit utilization ratio. And the FICO scoring model generally penalizes consumers who use more than 30% of the available credit on their cards.

FICO gets the information about what you’re charging—and all the information used in your score, in fact—from the three major credit bureaus, Experian, Equifax and TransUnion.

Here’s the rub: Card issuers typically report to the bureaus on a specific day each month, regardless of when your balance is due. This means that if you spend $4,000 on a card with a $10,000 limit, and this balance is reported midway through your billing cycle, your score could get dinged—even if you later pay it off by its due date.

To be on the safe side, keep your credit utilization below 30% on all of your cards, at all times.

THE MYTH: Applying for too many loans in a short span of time will ding your credit score

Unraveling this half-truth depends on how you define “short span of time.” Ten percent of your credit score is determined by new credit inquires, and applying for too much credit too quickly—as in, over the course of a few months—will result in lost points.

But most scoring models count several applications for the same type of loan that occur within a 14- to 45-day window as one hard inquiry instead of many. So if you’re shopping for a mortgage, try to submit your applications within a few days of each other. This is better for your score than stretching the process out over several months.

 

Related:

MONEY 101: What is a Credit Score, and How is it Calculated?

MONEY Banking

Here’s One Thing You Probably Shouldn’t Get at Walmart

Cracked piggy bank with Walmart logo
MONEY (photo illustration)—Getty Images (photo)

Walmart's new partnership with GoBank may be a decent option for those unable to get a checking account from a traditional bank, but most consumers (even low-income ones) can find a better deal.

When Walmart announced Tuesday that it would soon be offering checking accounts for the masses—so its customers could, ostensibly, conveniently deposit their checks where they purchase all their household goods—we saw an opportunity to compare the new banking option to its competitors.

Thanks to research compiled for MONEY’s annual Best Banks in America story, the latest version of which will be out on newsstands on November 28, we were able to measure up the new account against more than 200 other checking accounts.

But before we jump into our analysis, it’s important to understand what exactly Walmart is doing. First of all, the retailer is not technically its own bank (since its efforts to become an official deposit institution were basically foiled by the banking industry in 2007). The Walmart will simply offer a GoBank account through its partner Green Dot, an FDIC-insured banking platform that currently issues Walmart’s prepaid card.

The GoBank checking account—no savings as of yet—comes with a relatively low $8.95 monthly “membership fee” (essentially a maintenance fee) that can be waived with a $500 monthly direct deposit. But perhaps more interesting is the fact that it has no overdraft fees whatsoever, and virtually anyone—even those with terrible credit or a history of bouncing checks—will be approved for an account.

Greg McBride, chief financial analyst at Bankrate.com, says GoBank’s low eligibility requirements are unique in the industry and could be helpful to people who have frequent trouble with overdrafts. But McBride cautions that the people described make up a small subset of most consumers. Just one in seven bank customers have had more than one overdraft in the last year, meaning an even smaller subset of that group would be in dire need of GoBank’s leniency.

As it stands, the vast majority of people—even those with low incomes or mediocre credit scores—are able to qualify for checking accounts with similar or better terms than what GoBank offers, says McBride. Many competitors offer perks GoBank does not, such as interest payments or free use of out-of-network ATMs.

Below, we’ve set the account against some of the better options for standalone checking:

Account Maintenance Fee Minimum Interest Out-of-network ATM fees Overdraft fees? Credit score check to open?
Walmart’s GoBank Checking Account $8.95 (waived with a $500 monthly direct deposit) 0% $2.50 No No
E*Trade’s Max-Rate Checking Account $15 (waived with a $200 monthly direct deposit) 0.01% $0 (and all third-party ATM fees are reimbursed) Yes No, but they do check on past overdraft history.
Capital One’s 360 Checking Account $0 0.20% $0 Yes, but only $0.03 a day for every $100 of overdraft balance Yes
Ally Bank Interest Checking Account $0 0.10% $0 (and all third-party ATM fees are reimbursed) Yes Yes

For our Best Banks feature, MONEY also looked at mobile apps, and from what’s been announced so far, GoBank’s app does sound state of the art. A built-in budgeting program called Fortune Teller asks users to input their various bills and expenses, along with their salary and pay day. And once all the information is entered, users can ask Fortune Teller’s opinion before they buy something by entering in the price.

In theory, this sounds great—most people could use a virtual slap on the hand when they’re about to overspend. But the devil is in the details. It’s unknown how much of a financial buffer Fortune Teller’s algorithm leaves when it tells a person he or she can afford a purchase. And when the advice is coming, however indirectly, from a store that has plenty of things to sell to you, you’d be smart to be skeptical.

In other words, just because you can afford that $1,000 Gollum Halloween party prop doesn’t mean you should buy it. And just because you can get easily approved for this bank account doesn’t mean you should apply.

Related:

MONEY 101: How do I pick a bank?

MONEY identity theft

Home Depot Says Hackers Stole 56 Million Card Numbers

The home improvement retailer says it has eradicated the malware that compromised its customers' debit and credit card numbers.

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