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Life after the death of a spouse

All over the country dead men are paying credit card bills.

"There's a whole bunch of dead men who are still spending on credit cards because the widows found out that a dead man's credit is better than a live woman's," says Ginita Wall, a certified financial planner and co-founder of Women's Institute for Financial Education.

A married woman who fails to establish credit in her own name can be in a tight spot after her husband dies. A widow on a fixed income has it especially tough. Her solo income may place her below the threshold required for many credit cards.

So a widow continues to charge on her husband's old cards as she sifts through the emotional and financial fallout following his death.

"I think a lot of people don't realize how difficult it is to get credit when you're in a bad situation," says Kerry Hannon, author of Suddenly Single: Money Skills for Divorcees and Widows.

The best way to maintain strong credit during this difficult time is to have good, established credit in your own name. Early in the marriage, each spouse should make a point of applying for credit cards on his or her own.

"Apply for credit in your own name," Wall says. "Even a stay-at-home mom or wife can get a card based on family income."

You'll also have one less financial thing to worry about after a spouse dies.

With joint credit card accounts, the surviving spouse will need to contact creditors and explain that a husband or wife has died and request that the account be changed to a solo account. Some creditors may ask for a copy of a spouse's death certificate.

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Benefits can change
"If the account is in pretty good shape most creditors will honor the transfer," Hannon says. But some creditors may take the opportunity to re-price the card, by bumping up the interest rate or lowering the credit line or both.

This scaling back of card benefits may also occur when a widow who has been an authorized user on a husband's credit card contacts the card company and asks for a card in her own name. It's likely the bank will ask the widow to apply for a card on her own. Whether she is granted credit and at what price will be determined by her own credit standing and income.

Widows with no credit history and low income may get booted down to the bottom of the credit barrel. They may get stuck with cards with high interest rates and high fees. And they'll have to start at square one to build up their credit. Signing on for a secured credit card is a good way to start.

"That's a good way to step back in," says Hannon of secured credit cards. "When you get one, the key is to make sure you can pay it off each month."

With secured cards, a cardholder makes a savings deposit in exchange for a credit line. Secured cards have annual fees and high interest rates. Credit lines are typically hundreds of dollars rather than thousands. After a year of on-time payments, cardholders may be able to qualify for an unsecured card at a lower interest rate with a higher credit limit.

As with any high-rate credit card, the best strategy is to pay off a secured card bill every month to avoid paying big charges for interest.

This article from Bankrate.com outlines the 10 questions to ask before choosing a secured credit card.

This Bankrate.com survey lists secured card offers from lenders around the country.

A widow who shared a joint credit card account with her husband is responsible for all bills and payments on the account.

"You're kind of freaked out but you need to pay your bills," Hannon says. "You're creditors are not going to be so soft-hearted."

Some creditors may be willing to offer surviving spouses a bereavement deferral on payments. It's best to ask about postponing a payment before it's past due.

Surviving spouses are not responsible for the debts incurred on a husband's or wife's solo credit card account.

"The account really becomes null and void because the person who's responsible for paying is no longer living," says Catherine Williams, president of Consumer Credit Counseling Service of Greater Chicago.

This is true even if the surviving spouse was an authorized user and made charges on a card issued in the husband's or wife's name.

Be a credit survivor
Determining which of a couple's many credit cards are joint accounts and which ones are not is just one of many financial tasks a surviving spouse faces.

Charting out a financial checklist with your spouse when you're both healthy and happy is the best way to smooth this transition. It will save a widow or widower a whole lot of time and additional stress.

"You and your spouse should sit down once a year and talk about what you would do if one of you died tomorrow," Wall says. "What do we have? And where is it? What investments do we have? What debts do we have? Where are the papers?

"The worst time to have to deal with those things and see it all for the first time is when you're grieving." It's also a good idea for the couple to build up an emergency fund with living expenses for three to six months. A widow or widower can tap into this account to pay bills as they work to get their financial life in order.

"If you have an emergency fund, you have enough to pay next month's mortgage and it will keep you from panicking," says Cindy Hounsell, executive director of Women's Institute for a Secure Retirement.

Take things slow. The six months to a year after a spouse dies is not the time to make dramatic financial changes or investments. This is especially important for widows and widowers with little financial experience.

"Put your money in something that's really safe like a money market or a CD. The biggest mistake widowed women make is to listen to hot investment tips. They're prime targets for sales people," Hannon says. "Ride it low and don't take any hot tips. Wait until you have a strong understanding of money management. Wait until your head's clear."

-- Posted: March 28, 2001

 

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