If you are struggling with credit card debt, you will no doubt be looking at ways to sort this out. Nobody wants to be stuck in the cycle of high-interest rates, missed repayments, and a never-ending outstanding balance.
Not to mention the impact on your credit score and therefore the problem of getting better financial options and deals.
If your spouse has a much better credit score than you and is willing to consolidate your debt as their own, then is this something to consider?
In this article, we will look at how you can balance transfer credit card debt between partners, along with the pros and cons of doing so.
Although this service is not offered by all card providers (you will need to check your terms & conditions), if your card provider does allow spousal balance transfers it could be the solution for you. As they say, a problem shared is a problem halved.
Why It Could Work For You
As a married couple, you will already know how financial strain can impact our day-to-day lives. Whilst you may run your finances independently, if one-half of the partnership is in debt, it will affect you both.
If your spouse has a great credit score and manages their finances with ease, they will no doubt have lots of appealing credit options open to them. If, however, you are struggling to make your repayment terms with a high APR credit card, your overall financial profile will be lowered.
This will cause a problem when you seek to gain loans or credit together, for instance for a mortgage application. When considered as a unit, your negative credit will impact you as a team. That dream home might have to wait!
With this in mind, if you were to transfer your current debt over to your spouse, your overall financial profile would improve. By consolidating the outstanding debt onto one card which has better terms, the balance can be paid off sooner and cost less in the long run.
You will ultimately save money as a family by transferring the debt.
What Could Go Wrong?
There are a number of ways in which this process could go horribly wrong. Worst case scenario is that you could separate. This might not be such a bad thing for the transferee, but the owner of the new debt would certainly not be laughing.
Whilst this may seem a bit extreme, we all know how Jeff Bezos ended up! It can, and does, happen. Separation is sadly a part of life.
If this were to happen, what would happen to the repayments of the debt? Would your spouse be able to make the repayment dates and amounts? Would you still continue to make repayments to your ex Spouse?
Although not something we like to think about, this is a serious consideration that should be taken into account and discussed between yourself and your partner.
Similarly, what if your partner were to lose their income stream and no longer be able to repay the debt? Would you be able to assist with the combined repayments, or would you fall into a worse state of affairs than you were in to begin with? Without wanting to sound very doom and gloom, it really is something you need to think about very carefully before proceeding.
Another factor to take into consideration, is that the balance transfer could actually impact your spouse’s credit score negatively. Credit card companies like to have a 30% credit utilization ratio on their customers accounts.
Would taking on this additional debt push your spouse’s credit lending over 30% of their credit limit? If so, this might have an impact on your spouse’s credit score.
Depending on the amount transferred, in the eyes of the lender (in this case the credit card company), your spouse has gone from a responsible card user, to someone who lends to their limit.
They may assume financial pressures or struggles, even if the money is repaid each month. The lender will not see the ‘bigger picture’, only an increase in debt in a short space of time. This will undoubtedly negatively impact your spouse’s credit score in the short term.
Your Financial Situation As A Family Will Improve
As a partnership, overall financial issues will have an impact on both of you. By consolidating debt into one lower interest account, you will be saving money for your household.
Your Relationship Will Improve
All going well, by removing the financial stress of debt, your relationship should flourish. You will feel a deepened gratitude for your spouse and a sense of team spirit by creating a solution together.
Your Credit History And Score Will Improve
Whilst we have mentioned that your spouse’s credit score could drop initially, if repayments are made correctly, this will eventually improve.
What’s more, as your spouse will have shown that they can responsibly lend more money AND repay on time, they will become more attractive to lenders in the future. As you’re now out of debt, your score will also improve.
You’ve saved a heap of money and have better future prospects. This is the dream Win-Win scenario.
It Could Ruin Your Relationship
As discussed above, the consolidation of this debt could not end as you initially hoped. Your partner may become resentful that you have run up the debt in the first place. It may add a strain to your relationship.
You End Up Worse Off Financially
If your spouse is unable to make repayments in full and on time, you could end up in a worse financial situation that you were originally.
Furthermore, if the partnership were to break down, your spouse would be left with a much larger debt to deal with independently.
Less Available Credit For Emergencies
If you have consolidated all of your household credit debt onto one card, you will ultimately have less credit available to you as a family through your spouse’s card.
Does your spouse keep their card as a backup for emergencies? Will they miss the additional flexibility by adding on additional debt to their credit?
This point is important to really consider. Whilst it seems a good idea to remove the debt and save some money; if you were to lose your job, or become unwell, would you need to rely on your spouse’s credit card to survive? Would the additional debt prevent that?
So, as you can see, there are a lot of factors to take on board when considering a balance transfer between a spouse’s credit card. Yes it is an option, but does that mean that you should do it?
Whilst, overall, it is something that can positively impact your household’s financial health, it is also important to look at what can go wrong. Life is like a box of chocolates, after all!