The Pros and Cons of a Joint Credit Card

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Thinking of getting a joint credit card with a family member, friend, or significant other? 

Joint credit cards are a type of credit card account where two people file a joint application and get approved based on their combined finances. Holding a joint credit card account with another person means both parties are legally responsible for the debt. Both account holders’ credit scores are affected (either positively or negatively) the same. 

Given the pandemic’s unpredictable effect on the economy and job loss, many lenders are getting stricter with their approvals, so joint cards might offer some people an easier path to credit. 

“It used to be you could easily qualify for a card with a credit score in the upper 600s, low 700s. Now you need a credit score of at least 700 or 740 to feel confident,” explains Ted Rossman, industry analyst at CreditCards.com. He says credit card approvals have become noticeably harder in the last few months because of these factors.

Issuers are looking at how many other cards you’re carrying with an outstanding balance, says Faron Daugs, CFP, founder and CEO of Harrison Wallace Financial Group, a wealth management firm in Libertyville, Illinois. To vet credit card applicants, “issuers are going to look more stringently at what [balances] you currently have,” he says. 

Depending on your financial situation, you could benefit by applying for a credit card with another person to receive more favorable terms by lowering the risk and liability for the card issuer. 

 As with all financial products, there are pros and cons to opening a joint credit card account. Here, we’ll break down your different options for combining finances with someone else in the form of a credit card. 

What Is a Joint Credit Card Account?

A joint credit card account is a shared credit card account where both parties have equal access to spending and joint liability for any debt. Each account holder has his or her card and the same level of account access. (With individual card accounts, spending limits and liabilities belong to just one individual.) Some married couples prefer to have all of their finances combined in a joint account, giving the other person access to the account in the event of an emergency or death. However, others like to use individual accounts with sharing capabilities, such as authorized user accounts or co-signer accounts (more on those below).  

How to Get a Joint Credit Card

Like an application for a joint mortgage or joint checking account, a joint credit card account requires an application from both parties. Both individuals provide their social security number and run a hard credit check. Income verification is also taken into consideration. Issuers will then use the information from both applicants to determine the terms (i.e., interest rate, spending limit) of the joint credit card account. 

When you’re applying for a joint credit card, Chris Browning host of the Los Angeles-based podcast, Popcorn Finance, recommends asking the issuer: 

·      What are the terms of the joint credit card?

·      Can one of the owners be removed?

·      If so, do both owners have to agree to the change?

·      Will both owners receive a unique login?

You’ll also want to understand the annual fees, if there are individual spending limits, penalties and interest rates, and if the credit limit reduces for a missed payment, adds Daugs. 

There are only a few major banks currently offering joint credit card accounts PNC, U.S. Bank, and Bank of America. “Joint credit cards are becoming a rarity with most lenders offering authorized users instead,” says Browning. 

Rossman suspects this rarity might have something to do with the Consumer Financial Bureau’s amendment to the CARD Act Rule in 2013, which now allows credit card issuers to consider accessible income on credit card applications. Meaning, “stay-at-home spouses or partners who have access to resources allow them to make payments on a credit card can now get their own cards,” said CFPB Director Richard Cordray in the announcement. Previously, spouses and partners not making any income could be penalized and thus have a more difficult time opening up a credit card or having access to higher limits.

Higher divorce rates could be another contributing factor to the decrease in availability of joint credit card accounts, according to Daugs. “Credit cards are not as controllable as joint checking accounts,” he says. So when credit card issuers and banks look to simplify their offerings, they’re more likely to cut joint credit card offerings because of the challenges associated with them during life events such as divorce. 

The Pros and Cons

Because you’re taking on the responsibility of someone else’s debt, you should seriously consider any financial decision with the other person involved. 

Joint Credit Card Accounts

Pros:

  • Both account holders receive credit benefits equally (if managed properly). 
  • Both account holders have the same level of access.  
  • Streamlined and simplified combined finances.
  • You can earn rewards faster with two people using the credit card account.

Cons 

  • If you carry a balance, both account holders’ credit is affected. 
  • Potential relationship strain if not properly managed. 
  • Limited options only at select banks.
  • Both account holders have to be involved with closing the account.  

Authorized User Accounts

Authorized user accounts can be an alternative to joint credit cards. They are credit card accounts opened by one primary account holder who can then add other people to the account. Typically, each authorized user has their own card with his or her name on it. 

Pro Tip

Make sure to consider all the terms and conditions before jumping into any joint account that can affect your credit. Most especially, how easily you can exit the account if you need to.

Authorized user accounts differ from a joint credit card account because the primary account holder is the one who opens the account, and his or her finances determine the terms of the card. That person is solely responsible for any debt carried on the card. Authorized user accounts are a popular option for couples where one person might have significantly worse credit than the other and for parents and their children. While the card‘s use impacts the primary account holder’s credit more heavily, most banks report authorized users to the credit bureaus. Hence their credit is also positively or negatively affected over time. To address financial concerns, some banks allow spending limitations on authorized users’ cards. 

Pros:

  • Favorable terms based on main account holders credit.  
  • Plenty of options available at a wide variety of banks.
  • Accrue rewards and points faster with two people using the card.
  • Some cards have spending limits for authorized users.
  • Easy removal of authorized users. 

Cons 

  • Good credit habits don’t positively impact the authorized user as much as the primary account holder. 
  • The primary account holder is legally responsible for all of the debt.
  • Potential relationship strain since one person is legally liable for payments.
  • Authorized users have limited access to the primary account for customer service issues.

Co-Signer Accounts 

Another option for opening a combined credit card is a co-signer account. These are almost as rare as joint credit card accounts, but they do exist. With co-signer accounts, one person is backing up another person’s credit card application and agreeing to take on the debt if the primary account holder defaults on payments. These types of accounts are another way for someone with poor credit to build up their credit score if they can get someone with a higher credit score to back them by co-signing a credit card account. However, the co-signer doesn’t usually have card access to the account. 

Pros:

  • Can help improve the credit score and get more favorable terms.
  • Allows the primary account holder to have primary access and account management. 

Cons 

  • Limited options at only a few banks.
  • Limited to no account access for the co-signer. 
  • Both parties are legally responsible for the debt.  
  • May cause relationship strain between if abused by card user.  

Separate Credit Card Accounts

Lastly, there is the option to maintain separate accounts between you and the other person. Having different credit card accounts makes sense if you’re trying to keep your finances separate, want spending privacy, and aren’t as concerned about racking up miles, points, or other rewards. In this case, each individual applies and opens a credit card in their own name, and the other person has no right or obligation to the credit card account. 

Pros:

  • Complete financial independence and privacy. 
  • Tons of card options for varying needs and spending habits.
  • Irresponsible card use doesn’t affect any other person but the card holder. 

Cons 

  • It can take longer to build good credit. 
  • More difficult to manage combined finances.  
  • With only one person spending on the account, you don’t earn rewards or points as quickly.

Is a Joint Credit Card Account Right For Me? 

Financial decisions can impact even the strongest relationships, so consider all aspects of your spending habits and personal finances before opening an account with someone else. 

New York-based NextAdvisor contributor and author of Broke Millennial Talks Money, Erin Lowry, advises having a transparent conversation around the topic, by asking: “What’s the benefit of having a joint credit card for us? What is our goal with this joint credit card? Who is responsible for paying the bill each month?” Lowry warns, “don’t just assume your partner is paying it off.” She also suggests discussing spending expectations and limits ahead of time. 

Before going into a joint credit card application, make sure you know each other’s credit scores and total card already opened, says Rossman.  “If one person has a way better score than the other, that can really affect if you get approved and what interest rate you pay.” Given their nature, joint credit cards tend to make the most sense for married couples or those in committed partnerships who want to have equal access and responsibility to the account. 

If you are using a joint credit card to piggyback on the other person’s credit, you should still consider the option of becoming an authorized user instead. In most cases, this will still help both parties build up credit with proper management. However, the terms of the credit card will be based only on the person with higher credit, and the person as the authorized user has no legal debt obligation. Another benefit with authorized users is the primary account holder can enact spending limits on the card’s use, and both parties can amicably remove themselves from the account. 

Authorized user accounts make the most sense for parents looking to add a child to their account. Some people might find this to be a better option, especially given the versatile card options available. “Most people should have more than one credit card anyways,” says Rossman. He recommends for some, it’s smart to have a few different cards open where you vary who the primary account holder is and add the other person as the authorized user. This way, in theory, the debt obligation is split, and both parties still get the benefits of a shared credit card like building credit together and earning points and rewards faster. 

In general, authorized user accounts are more common and available to open at most banks. However, there are some scenarios where a joint credit card makes more sense. Both options have their own set of risks and rewards and are worth considering for those looking to share a credit card.