You may consider getting a joint credit card account with your spouse, partner, or even your child to simplify bill payments, merge your lives, or help that person build a better credit score. Managing a joint credit card account isn’t always easy. You need to discuss everything you decide automatically when you have a credit account of your own.
Joint account holder vs authorized user
To share a credit card account, you can add a second person as an authorized user or as a joint account holder, also known as a joint account holder. The authorized user is not legally responsible for repaying the credit card charges but can make purchases on the account. Joint account holders are responsible for repaying the credit card charges. Both options have benefits. Before deciding which option is right for you, you should carefully consider your personal situation.
Some banks report authorized user activity to credit bureaus. This means that parents who want to help their children build credit may choose to add them as authorized users on their accounts. Or if one spouse has a low credit rating, the higher-rated partner might add the other as an authorized user for the same purpose.
Not all credit card companies report authorized user activity to credit bureaus, so make sure to confirm their practices before adding someone to your account.
Joint accounts are more common in relationships that involve equal financial responsibilities. Credit card companies typically do not allow the addition of a joint account holder after an account already exists, so both parties must apply at the same time. Both parties share the benefits and responsibilities just as they would in a joint bank account.
Banks that offer joint accounts
Not all credit card companies offer joint accounts as an option. As of 2019, US Bank and PNC Bank are examples of credit card companies that still provide this option. Most other major banks have moved away from this practice but do allow account holders to add authorized users. If you’re getting a joint credit card account, make sure this is what you are getting. Policies and practices change frequently, so companies may add or remove the option for joint accounts at any time.
For a joint account, both cardholders will need to provide their personal information on the application, and the card issuer will conduct a credit check on both applicants. The credit check results and credit histories of both applicants will be considered when the issuer decides whether to approve the application and what terms and limits will be assigned if approved. Regardless of your credit quality, you should expect a low credit limit and a high-interest rate if a joint applicant has a poor credit rating.
Implications of separation
If you separate from your joint account holder, both of you are still responsible for paying the credit card bill. Even divorce does not change the terms of the original contract. If a judge says you both pay half the bill, but your ex-partner does not comply with the deal, the credit card company does not care – you are both still responsible for making payments. You should also be wary of retaliatory spending – when an angry ex-partner racks up the credit card bill and doesn’t care about paying it off.
Your credit card company may not allow you to close the joint credit card account until the balance is paid off, so the other account holder may continue charging while you work on paying down the balance.
Closing
Account management is often not the best option for obtaining a good credit score as it will reduce your available credit and may shorten the average age of your credit accounts. However, it likely remains the best option after separation to prevent any further issues.
The account holder can remove an authorized user at any time, but authorized users may find it difficult to remove themselves from the account on their own, depending on the credit card company’s policies. Any account holder on a joint account should be able to close the account. If there is a disagreement on how to handle the account closure, the terms should be specified in the divorce agreement.
Best Practices
Sharing a credit card account with someone else does not have to be difficult, but there is planning involved that requires account holders and authorized users to discuss what they will use the card for, when they will use it, how they will pay for it, and more. Here are some issues to consider:
Purchase Limit: Set a limit on the cost of any purchases that require prior discussion. For example, you might decide that you both need to agree on any purchases over $200. This way, there are no surprises when you come home with an expensive item or when the bill arrives.
Communication: Even for purchases below the limit you set, it’s good to share that information so the other account holder knows about any pending transactions that will affect your available balance. Understanding your partner’s spending habits is a big part of that. If you are a big spender and your partner is very frugal, you both need to understand how these habits will affect sharing the credit card.
Check the Balance: Electronic apps have made tracking spending easy, and most credit card accounts are updated in real-time – or close to it – when purchases and payments are made. Get in the habit of checking your balance before you use your card. If online banking is not available for your account, you can call customer service to do the same.
Who Pays the Bill? If you are paying bills together at the same time from one account, determining when to pay the bill is easier. If this is not the case in your household, you should agree in advance on who will pay the bill and how the other account holder will contribute.
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Sources:
Capital One. “Co-Signers vs. Authorized Users: What’s the Difference?”
JPMorgan Chase. “Do Authorized Credit Card Users Help to Build Credit?”
Capital One. “What to Know About Joint Credit Cards.”
Fair Isaac Corporation. “Will Closing a Credit Card Help My FICO® Score?”
Source: https://www.thebalancemoney.com/managing-a-joint-credit-card-account-961118
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