What? A joint credit card? That sounds a bit risky you say. Well, it can be.
For one thing, how the two of you use that card will show up on both your credit reports. If your loved one goes over your credit limit, your credit score will also be affected. Plus, both of you are responsible for the card’s balance. If your significant other goes on a shopping spree and buys $2000 worth of clothes or a new big screen HDTV, you’ll also be responsible for the debt … like it or not. According to an article published on CreditCards.com, 1 out of 5 Americans committed financial infidelity against their partners. This is not an impossible scenario.
There are some good reasons to get a joint card and here are six of them.
It could help both your credit scores
If both of you use the card responsibly, which means charging only those things you can afford and paying off your balance each month then both of your credit scores will improve. When your credit score goes up, you’ll be able to qualify for lower interest rates when you need more credit. You should also find it easier to rent a house or apartment because, yes, that prospective landlord will check your credit scores.
You’ll earn those juicy rewards quicker
A rewards credit card is one of the simplest and fastest ways to get freebies. You should be sure to get a card where you earn points, cash back or airline miles on your purchases. According to the data from CardHub.com, travel rewards give the most value. After the two of you have accumulated enough rewards you’ll be able to trade them in for travel, merchandise, statement credits or cash. Regardless of what the credit card companies would like you to believe it takes time to accumulate those rewards. A joint credit card will help you do this quicker because you both will be racking up rewards. Spoiler alert – don’t go crazy with that card just to earn rewards. Even if you’re earning 2x cash back that’s 2% or just two cents for every $100 you spend. So, if you’re not careful you could reward yourself into some serious debt.
You may qualify for a card with a lower interest rate
Do you have less than stellar credit? If so, you won’t be able to qualify for a low-interest credit card on your own. But if your loved one has great credit and you apply for a joint card you might qualify for one with low interest and a higher balance. This can be important if there comes a month when you can’t pay off your full balance as you’ll be charged less interest and should be able to catch up faster.
It’s easier to close a joint credit card
Let’s say the worst happens and your partner dies. When this is the case it’s much easier and faster to close a joint credit card. To close a credit card that’s in just one person’s name requires a death certificate, letters of testamentary and practically an act of Congress to shut down. Of course, if the two of you have a joint credit card and one of you dies, the surviving partner will be responsible for paying off the card’s balance.
Do the two of you share expenses such as groceries, recreation, entertainment, and insurance? If you get a joint card you may find it easier to manage things. All those expenses will be on your statements making it easy to split things down the middle. This also eliminates the need to write checks to each other or exchange money because all each of you will need to do is write a check to the credit card company for your share of the costs.
You will be more accountable
When you are the sole owner of a credit card you’re the one managing the account. This can make it easier to overspend and end up creating a big debt. However, when you share that credit card with your loved one there’s an accountability factor. Why is this? It gives the both of you a reason to give some extra thought before buying things. That’s because your significant other will see what’s being charged. Instead of splurging on something, you might take time to think about whether you’re being reasonable and what are your total charges compared to your net income. You want to avoid money arguments so you try to be more cautious of how you spend. According to the study published on APA.org, 1 out of 3 adults admitted that money is a major issue in their relationship.
It’s not the only solution
If there were reasons why you wouldn’t want to get a joint credit card there is another solution. You could add your significant other as an authorized user on one of your credit cards. Your loved one could then use your credit card and might benefit from the way you have sensibly used your card as this would be reflected on his or her credit report. Of course, since your significant other would not be the primary account holder he or she would not get the same privileges as would a joint account holder. For example, your partner could not call the credit card issuer to ask about balances, request an increase in the credit limit or a lower interest rate or dispute a charge. On the other hand, a joint account holder has all of those full privileges.
If you’d like to know more about the pros and cons of adding an authorized user, here’s a short video that can help.
The most important thing
The critical thing about a joint credit card is the same as for a credit card in your name only. The two of you need to charge only what you can afford to pay for when your monthly statement roles in and make sure you pay off your balance every month. And it’s critical to never be late making a payment as this can have very serious consequences. In addition to being charged a late fee, your credit card issuer might lower your balance and increase your interest rate. So be careful, use that credit card wisely, don’t overspend and it could be a real friend.