Most married couples have joint mortgages, joint bank accounts and probably joint auto loans. This means their next logical step would probably be to get a joint credit card. But there are some dangers involved in joint credit cards as well as some positives and negatives. Before the two of you fill out an application for a joint card here are some things to consider as there may be another solutions that would let you achieve the same things.
You’re equally responsible
Joint credit cards are like joint checking accounts in that both of you share it equally. This means both account holders are equally liable for charges made on the card and can, of course, make charges to it. Either person on a joint card can start a dispute, do a balance transfer, report the card as stolen or lost, request an increase in the card’s limit or even close the account. Just imagine how surprised you would be if you tried to use the card only to have it rejected because your spouse had closed the account, However, neither of you can usually take the other person off the account.
There are advantages
According to BusinessInsider.com, couples should have a joint credit card to minimize the danger of having one spouse hide problematic accounts from the other. The article revealed that there are actually 72 million of these hidden accounts. This is a recipe for marital disaster.
There are actually some very good points in favor of getting a joint credit card. This can be especially true for a child over 18 years old, a spouse or close relative. Here are a few of them.
If the account remains in good standing both account holders’ credit will benefit. In other words, if you make your payments on time so you’re not carrying any balances forward, both your credit scores should improve.
If one of the cardholders’ income or credit is much better than the other’s, then the person with less income or poor credit might be able to get a credit card that he or she wouldn’t be able to get on their own.
Your finances should be simplified with a joint credit card as all of your spending would be consolidated on just one bill. You would have only one payment to make a month, which would be much simpler than trying to remember the payment due dates of multiple credit cards.
The possible negatives
So long as the bill gets paid on time and both of you are on the same page in terms of charging purchases to the account then a joint credit card can be great. However, there are some warning signs or reasons to be careful.
First, if there are defaults or delinquencies they will show up on the credit histories of both cardholders. To put this another way, one person’s credit card sins could affect the other’s credit reports and score. According to Nerd Wallet, 1 out 4 couples with one partner in credit card debt admitted that it has a negative effect on their relationship.
In a worst case scenario if you get divorced both of you will be responsible for any debts even if just one of you made all of the charges on the account. This might surprise you but a divorce court cannot change the terms of a joint credit card agreement.
In an even worst case scenario if one of you dies the surviving person will still be responsible for paying off the debt.
A joint credit card can cause a lot of friction in the relationship if you have different spending habits. For example, one of you might be frugal while the other’s a shopaholic. If this were the case you can just imagine how many disagreements or arguments there would be.
Some people have found a better alternative that would accomplish the same things. It’s to get a credit card in their own name but then add their spouse or child as an “authorized user.”
Authorized users have the same benefits of being able to make purchases using the account but aren’t legally responsible for them. They are also not allowed to redeem rewards. This could help you, the cardholder, bulk up your rewards much faster than you would be able to do on your own.
How the authorized user handles the card will be reported to the credit bureaus so if they use it responsibly her or his credit should get a boost. Here’s a fun video from CreditKarma that explains how this works.
Unfortunately, there are two big negatives to putting an authorized user on your credit card. First, there is no way to control the other person’s spending. You might receive your monthly statement only to find your authorized user has charged up thousands of dollars worth of things. You’d be stuck because you’re the one that’s responsible for repaying the debt. A second negative is that some credit cards do not separate your charges from those of your authorized user. If your goal is to keep track of his or her purchases you would need to get a card where you could see which purchases were made by you and which were made by your authorized user. Many banks, including Chase, Wells Fargo and Bank of America won’t itemize the charges made by an authorized user. However, American Express, Discover, Barclaycard and U.S. Bank will. So if you’re contemplating getting a new card where you would add your wife or child as an authorized user you should get your card from one of these four.
The bottom line here is that there are some benefits to getting a joint credit card account. However, you can accomplish most of them by simply adding an authorized user to your single-owner credit card account. If you do choose to get a joint account make sure you do understand the risks and that the both of you agree as to how the account will be handled in case the relationship doesn’t last. This falls in the same category as talking about your will. It’s not the most pleasant of conversations but it’s important that you have it before you do hit one of those worst-case scenarios. Also, think about that joint credit card versus just adding an authorized user to your card. This could help you achieve your objectives but without the risks associated with a joint card. Like with a joint credit card you need to be careful who you add as an authorized user and how much he or she can be trusted to use the card wisely. Otherwise, you might end up facing a financial calamity.