The Pros and Cons of Sharing
a Credit Card Account
Partners who blend their financial lives often share a credit card account as a way to stay accountable to each other, track expenses, and build or maintain their individual credit ratings. According to a 2016 CreditCards.com survey, 86 million Americans have shared a credit card with someone, and nearly 50% did so with a spouse. And although applying for a joint credit card together or adding your partner as an authorized user to an existing account can simplify the way you manage your money, it's not right for every couple. If you're considering sharing a credit card with your partner, here are things to consider before taking action.
Joint credit card account vs. authorized user: What's the difference?
If you and your partner apply for a new credit card as joint account holders, then you both agree to share responsibility for making payments on any balances owed and otherwise abiding by cardholder agreement terms — even if only one of you uses the card or pays the bills. If your partner makes a late payment, then your credit card issuer may report that on both of your credit reports, even if your spouse is the only account holder that uses the credit card to make purchases. The bottom line is that when you have a joint credit card account, you are each legally responsible for the debt accumulated on that credit card.
Authorized users, on the other hand, are not legally responsible for balances they accumulate. That means if you are a credit cardholder and you add your partner as an authorized user, you are legally responsible for anything your partner spends on your credit card. If you don't pay your bill on time or don't follow the rules established by your cardholder agreement, then your credit rating could suffer.
Why does credit score matter?
Your credit score is a number that helps lenders assess how likely you are to repay a loan. Lenders use credit scores and other information to evaluate risk. The higher the score, the lower the risk — and applicants with good credit scores may earn the most favorable borrowing terms. Maintaining a good credit score means you may pay lower interest rates than borrowers with riskier profiles. And getting married won't solve an individual's credit history problems, since spouses maintain individual scores — and not one
married score — throughout their lives.
That means you'll want to monitor and maintain your credit score indefinitely. If you have a partner and plan to apply for a joint credit card offer or other loan, then it may be wise to have your partner monitor and maintain his or her score, too. Although a 2016 Experian survey revealed that 40% of newlyweds don't know their spouse's credit score, sharing this information with one another is essential if you're considering a joint card or other loan, says Jeff Lido, a financial advisor with Advance Capital Management in Southfield, Michigan.
Being aware of each other's credit score and history can help couples avoid potential financial challenges and arguments over acquiring loans, spending, and saving money, Lido says.
The strength of your individual credit scores can set the tone for what you're able to achieve financially. For example, if you're planning to buy a home with a joint mortgage, having higher credit scores may help you secure a larger loan amount, or earn a better interest rate on that mortgage.
This conversation can lead to bigger talks about money and long-term planning. Annalee Leonard, owner of Mainstay Financial Group in Pensacola, Florida, recommends that couples look beyond credit scores to their larger financial picture.
Each spouse should have a clear understanding of the other's attitude toward money and whether they're coming into the relationship with financial baggage, such as debt, Leonard says. From there, you can move on to mapping out your short- and long-term financial goals.
Weigh the benefits of sharing a credit card
There are several good reasons to consider a joint credit card account if you and your partner are on the same page financially. First, there's the transparency factor. If you have a joint budget in place, sharing a credit card can be a good way to hold one another accountable for what you're spending and plan to spend.
A joint credit card can also take some of the headaches out of budgeting and paying bills. You can simply charge shared expenses to the card each month, rather than divvying them up.
Another nice perk of sharing a joint credit card is coordinating rewards, says Ian Atkins, an analyst with Fit Small Business.
Not splitting up your rewards among several individual cards may mean your household actually has enough rewards to use, Atkins says.
Additionally, better credit scores could help you qualify for upper tier cards with premium rewards. Mileage credit cards, for example, may allow you to rack up travel rewards, which could prove valuable if you and your spouse are globetrotters.
Perhaps most importantly, sharing a credit card can potentially be a good way for both spouses to build and maintain their credit.
The activity on a joint credit card account may be reported on both of your credit reports. If you're both using the card responsibly, that could help to improve your scores over time. That's something to consider if you're planning on applying for a car loan, or if a mortgage is in your future.
Watch out for the pitfalls of shared credit cards
While sharing a credit card account has some upsides, it's not always ideal. If one partner has bad credit because of a past financial mistake or poor spending habits, then a joint credit card may not work, says Leonard.
In some cases, your partner's credit score may actually keep you from getting approved for a joint credit card altogether. If that happens to you, your partner may be better off applying for a secured credit card, which may help rebuild credit.
Atkins suggests adding your partner to one of your credit card accounts as an authorized user if credit score is hindering you from getting a joint card. Just bear in mind that as the primary cardholder, you're responsible for all charges — not only the ones you make. If your partner runs up a sizable balance or pays the bill late, your credit score could be negatively affected.
Establish ground rules
Communication is essential when it comes to spending, Lido says, and establishing some guidelines can minimize the odds of running into trouble with a joint account.
Set ground rules for the kinds of expenses that can be charged on the card, Atkins says.
Not only will this help you stick to your budget, but it will also ensure that one partner isn't treating the card differently than the other.
Leonard advises that putting a spending cap in place can also head off arguments.
Couples should have an agreement that if anything over a certain dollar amount is going on the card, both parties must agree on the purchase, she says.
Whether opening a joint credit card makes sense ultimately comes down to how each of you approaches your finances, how your credit scores compare to one another, and what you hope to accomplish with your money individually and as a couple.
If you think a joint credit card is the right move, take the time to review the annual percentage rate and fees carefully for any card you're considering. If there's a rewards program, make sure it's a good match for both your spending styles. Finally, consider what the guidelines will be for using the card. The more thought you put into your final selection, the better your experience with sharing a credit card is likely to be.