A joint credit card may seem like a natural part of a relationship. After all, you’re sharing housing and utility bills. You both eat the food, sit on the furniture and use the internet and watch Netflix. Why shouldn’t you share a credit card?
There are solid reasons for getting a joint credit card. There are also some significant risks to the finances and credit of both parties and to their relationship. Considering both the pros and the cons of joint credit cards will help you and your partner to make the best decision for both of you.
What is a Joint Credit Card?
A joint credit card is a credit account that is held in two people’s names. Both signatories to the account share all responsibilities and privileges associated with the account fully.
There are a few basic features and responsibilities associated with a joint credit card:
- You will apply for the account together. The issuer will pull both your credit histories and base your approval, interest rate, credit limit and other terms on your combined income, debt-to-income ratio, and credit history.
- Each of you will be able to make charges on the account without the other’s approval.
- You may be able to make some changes to the account, such as requesting a limit increase, without the other party’s approval.
- Both of you are fully and equally liable for all charges, fees, and interest on the account, regardless of who spent the money.
- Late or missed payments will be reported on both credit reports and both parties will suffer equal consequences.
Those shared responsibilities can have both positive and negative potential outcomes, and you should be aware of both before you decide to open a joint account.
What Are the Advantages and Disadvantages of Joint Credit Cards?
There are advantages to a joint account, especially for the partner with less good credit:
- The partner with lower credit will have a better chance of approval and access to better terms.
- The partner with lower credit will have a chance to build their credit history without having to pay higher interest rates. The less financially reliable partner can benefit from the good habits of the more reliable partner.
- Reviewing a joint credit card statement together is a great opportunity to discuss your finances and plan for the future.
- Sharing a credit card means fewer bills to pay. If you’re trying to simplify your financial life, fewer statements in a month can make it easier to keep track and make payments on time.
There are also significant disadvantages and risks to a joint credit card:
- Both users can be affected by decisions made by only one. If your partner runs up a bill, you’re responsible, whether you approved of the spending or not. If one person handles the account badly, both could see their credit damaged.
- Disputes over handling the account can cause tension in a relationship. Arguments over money are a major factor in divorces and breakups, and a joint credit card can provide plenty of opportunities for disputes.
- A joint credit account can cause problems if the relationship changes or ends. You may have to close the account, as it’s usually not possible to remove one holder from a joint account.
- A joint credit card may offer fewer opportunities for rewards than two individual cards.
Nobody wants to think about a relationship ending or sinking into disputes when things are going well, but you should consider all possibilities. A joint credit card can be an asset to a relationship, but it can also be a liability.
Can We Get a Joint Credit Card?
Joint credit cards are not as popular as they once were so not all issuers offer them. You will have to find an issuer that offers a joint credit card with terms that you like.
You will also have to qualify for the card. The qualification process will be very similar to an application for an individual card, except that the incomes, credit reports and debt-to-income ratios of both parties will be considered. If one partner has a poor or limited history the other may need to have excellent credit to make up for those shortcomings.
Consider Authorized User Status
A joint card is not the only way to share a credit card. If one partner already has a card, the other can be added as an authorized user.
When you add an authorized user to an account the card remains in one name only. The cardholder can remove the authorized user at any time. The authorized user can make charges on the card, but the cardholder is the only one liable for the payments. The authorized user cannot usually make changes to the account.
Many issuers will report account activity to both credit reports, that of the holder and the authorized user. That can help the authorized user’s credit. Check first: not all issuers report authorized user credit.
Adding a partner as an authorized user can get many of the benefits of a joint account with fewer penalties.
Look at All Your Options
One of the most important factors in keeping a financial relationship from damaging a personal relationship is honesty. Before you decide how you want to arrange your credit relationship, discuss your credit status, incomes, needs, and goals openly. Think about what you want to accomplish and how best to do it.
Consider all the possibilities:
- You may wish to have separate cards that are your own responsibilities.
- You may wish to have separate cards for personal expenses and a joint card for joint expenses.
- One or both of you may choose not to have a credit card at all.
- You may choose to have a joint account.
If you do choose to maintain a joint account, reach a clear agreement on what it will be used for and who will pay for what. It may help to review statements together and consider any changes needed in your system.
A joint credit card can be a useful tool for financial management in a relationship. It can also cause serious financial and relationship problems. Consider the pros, cons and alternatives carefully before making a decision.