In a Divorce, Credit Cards Can Be Valuable Assets

Credit card debt is frequently a subject of conversation in the context of a divorce. It is not uncommon for married couples to carry debt on one or more credit cards. These debts can be the result of infrequent high-price items, like vacations, college expenses or indulgent gifts or purchases. They can also be the result of paying day-to-day living expenses, such as for food, gasoline, medical copays, or even utility bills. No matter how the debt was incurred, it represents an issue that must be resolved in a divorce proceeding. Debt can be distributed or allocated among divorcing parties just as an asset would. But the balance due on a credit card is not always the end of the analysis when discussing or dealing with the issue. The credit card, or more specifically, the line of credit, can be very valuable to the credit card holder.

It is very common, during a divorce, for a party’s credit score (the measure of a person’s credit trustworthiness) to be severely damaged if not destroyed. Parties going through divorce should take all possible steps to protect their credit scores, as it could be crucial to them once the divorce is settled or concluded. Maybe you need to have good credit to qualify for a mortgage refinance to buy your spouse out of the marital residence or purchase a new residence. Maybe you need to apply for a car lease or loan, or are filling out an application to rent an apartment. Many prospective employers are also looking at credit reports of potential employees. You may find that allowing your credit score to be destroyed during a divorce proceeding could have lasting effects long after the divorce has been resolved.

If you have a credit card in your name alone, try to maintain the account in good standing, particularly during a divorce proceeding. If your spouse has a credit card in his or her name on your account, it would be an advisable precaution to take them off your credit card account. If you have any joint credit cards with your spouse, you should probably close those accounts, unless you can’t because of an existing debt, in which case you should try to work out a plan with your spouse to make payments on the account to keep the account in good standing to protect both of your credit scores.

While most people think of credit cards solely as a source of debt, very frequently credit cards represent an actual asset of sorts. Most consumer and bank credit cards available today offer the card holder some type of accumulated benefit for using the card. Some common examples would be airline miles that are earned with every purchase, cash back bonuses, or credits toward merchandise. Credit card points can often be “cashed in” for flight vouchers, cash, merchandise, gift cards or many other valuable benefits. These accumulated benefits could represent a valuable asset which may be negotiable during the divorce proceeding as a marital asset. Further, the value of these may be of more value to one party than to the other. For example, a person who is afraid to fly will not care much for accumulated airline miles, and would be willing to accept money in exchange for their share of these airline miles.