Credit Card Rewards and Divorce: What You Should Know
If you and your loved one decide to part ways, you may have a fight on your hands—but not in the way you may think. In addition to deciding who gets the house and other assets, you may also have to haggle over who ultimately gets to keep credit card rewards. Credit card rewards can be quite valuable, garnering customers cash back, frequent flyer miles, and a host of other sweet deals. So when it comes time to split up, your spouse could battle you for some of these points and perks. Since some credit card issuers do not allow customers to divide points, things could get a bit hairy. Here are some things to keep in mind in the event your rewards are at stake during a divorce.
Can rewards be transferred or divided?
Make sure you understand the terms and conditions of the rewards programs you participate in. The last thing you want is to waste time and energy fighting over rewards, only to learn that the rewards can’t be divided. Attorney Louis P. Winner says if the program rules do not allow for the transfer of rewards, you and your spouse may want to come to an agreement on the value of the rewards and then offset the value with something that is of equal value during the divorce settlement. However, deciding on a reasonable value can be tricky and will require a bit of legwork.
“…Valuing points for rewards programs is not always easy. It may be necessary to be proactive in one’s research. For example, in the case of airline miles, it may be necessary to convert the miles into a ‘trip,’ and estimate the worth of that trip accordingly. This can help ensure that the valuation is appropriate,” said Winner.
How are rewards valued?
Another piece of information you’ll want to find out is how the rewards are valued. Some programs attach a cash value to their points while others do not. In cases where rewards can be divided, it will be easier if you can reference a cash value. As mentioned above, you and your spouse will need to agree on a value if the program does not have a clear value stated.
What fees are involved?
If your rewards program does allow points to be divided, ask your rewards representative if the points can be split evenly into two separate accounts. However, be aware that you may incur fees. Certified Divorce Financial Analyst Jeff Landers says couples could be hit with fees for transferring points, resetting expiration dates, or both. If there are fees, you and your spouse need to figure out how the fees will be handled.
Is it really worth the fight?
Depending on the situation, you may find that it’s not worth arguing over rewards points or frequent flyer miles. Take into consideration the additional fees for your lawyer’s time as well as the added stress involved.
“When considering things like frequent flier miles that people become emotionally attached to, it’s important to consider what they are actually worth. In many cases, it could be a wiser move financially to let a spouse take the miles and make a better deal elsewhere,” said attorney Daniel E. Forrest.