How do relationships affect credit card usage? Today’s New York Times talks about a timely issue in “Your Cheatin Wallet,” a play on an old Hank Williams song. I claim to be beyond this issue, after 38 years of marriage, though I do admit to persistently sneaking in purchases at Home Depot and Best Buy on my Chase Visa or Discover. It depending which issuer has a bonus this quarter.
I know my wife does the same at her old employer, Talbots, where in the early days she was a general manager, and over the years kept her discount as a salesperson so she could grab new items as they come off the truck.
The definitive analysis on household infidelity comes from Notre Dame in a recently published academic study titled Love, Lies, and Money: Financial Infidelity in Romantic Relationships. It covers much more than sneaking in a few flower flats from Home Depot.
Romantic relationships are built on trust, but partners are not always honest about their ﬁnancial behavior—they may hide credit card usage, spending, debt, and savings from one another.
This article introduces the construct of ﬁnancial inﬁdelity, deﬁned as “engaging in any ﬁnancial behavior expected to be disapproved of by one’s romantic partner and intentionally failing to disclose this behavior to them.”
We develop and validate the Financial Inﬁdelity Scale (FI-Scale) to measure individual variation in consumers’ ﬁnancial inﬁdelity proneness.
In 10 lab studies, one ﬁeld study, and analyses of real bank account data collected in partnership with a couples’ money-management mobile application, we demonstrate that the FI-Scale has strong psychometric properties, is distinct from conceptually related scales, and predicts actual ﬁnancial inﬁdelity among married consumers.
Hmm, strong psychometric properties on the FI Scale? All I did was spend $45. They classify Financial Infidelity into twelve categories and provide analytics on how the money gets spent. Categories range from “Hiding or lying about spending”, to not disclosing raises or bonuses, ramping up to “Inappropriate tax behavior.”
The study drills down their statistics with “Why” drivers. Drivers range from buying something a spouse might not approve of, to not disclosing a gambling win, and just squireling away the money for a rainy day
And, oh, the calculus of it all. The report breaks down standard deviations to the FI-Scale based on reasons for concealment and financial harmony.
The Times view is a bit more practical.
And because relationship conflicts over money and credit card usage tend to be recurrent and intense, Garbinsky added, they have become a top reason for divorce. A 2017 survey from financial advisers Ramsey Solutions found that money fights were the second leading cause of divorce behind extramarital affairs.
“If you go to a grocery store, you can buy any gift card and add it to the bill. So the grocery bill goes up, and one spouse may say, ‘Man, we’re spending a lot on groceries,’ and the other can blame it on inflation.”
From a credit management perspective, we fall back on a recent Experian study which discusses the downstream issue of ending the infidelity/finance issue with a pre-divorce bankruptcy:
Whether you pursue divorce or bankruptcy first, it’s essential to know to go in that it may not be possible for either process to completely disentangle your finances from your soon-to-be ex-spouse’s.
For example, Chapter 13 plans on marital debt may leave both parties legally responsible for repayments. There are also categories of debt that bankruptcy cannot discharge (student loans, for example), and if you or your spouse cosigned on such a loan, you may be equally responsible for seeing to it that those debts are paid, even after divorce and bankruptcy.
But for now, at least in the Riley household, our financial strategy will continue to ignore (or at least not complain) about purchases less than $50.
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group