Are you considering getting a joint credit card with your partner or a family member? Joint credit card accounts can be a convenient way to share expenses and build credit together. However, before you take the plunge, it’s important to understand how they work and consider alternative options. In this article, we’ll explore everything you need to know about joint credit cards and provide some alternatives worth considering.
How do joint credit cards work?
A joint credit card account is one that two people share. Both account holders are equally responsible for paying off the balance and any interest or fees incurred on the card. If one account holder fails to make a payment, the other is liable for the missed payment and any resulting fees.
When you apply for a joint credit card, the card issuer will review the credit histories of both applicants. Approval for the card will depend on the credit scores of both potential account holders. If one applicant has a low credit score, the other applicant’s good credit score may or may not be enough to earn approval.
Each owner’s credit report will reflect the payment history on the account, regardless of who makes the payment. Therefore, consistent, on-time payments and low credit utilization will reflect favorably on each owner’s credit report. Conversely, missed payments and high utilization will have a negative impact on the credit rating for both.
Who offers joint credit cards?
The number of banks and credit card issuers that offer joint credit cards is small. Among those that do allow them are U.S. Bank, PNC Bank, and some credit unions, such as BCU and Alliant. However, many issuers offer alternatives, such as adding an authorized user to your account.
Benefits of a joint credit card account
Joint credit card accounts can benefit couples or family members who want to share expenses and build credit together. Here are some advantages:
Shared expenses
A joint credit card account allows two people to share expenses and manage their finances together. This can be particularly helpful for pooling resources to pay for shared expenses such as groceries, rent, or household bills.
Build credit together
By making payments in full and on time, both account holders can build their credit scores together. This can be especially beneficial for individuals who are just starting to build their credit history.
Convenience
Having all purchases and expenses in one account can simplify tracking spending and following a budget. Both account holders use the same card, which saves time and eliminates confusion with multiple statements and accounts.
Higher credit limits
A joint credit card account may have a higher credit limit than an individual credit card account, considering the credit scores of both account holders. This can provide more flexibility for making large purchases or managing unexpected expenses.
Disadvantages of joint credit cards
As appealing as joint credit card accounts may be, there are downsides to consider as well:
Shared responsibility
Both account holders are equally responsible for paying off the balance and any interest or fees incurred on the joint credit card. If one account holder fails to make a payment, the other is liable for the missed payment and any resulting fees.
Financial conflicts
Different people have different spending habits and financial goals. This can create problems unless both account holders establish ground rules and communicate clearly to avoid conflicts or financial issues.
Credit risks
If one account holder has a poor credit history or a history of missed payments, it can negatively impact the credit score of the other. This can make it more difficult for individuals to get approved for loans or credit in the future.
Difficulty removing account holders
Removing an account holder from a joint credit card account can be challenging without paying off the entire balance of the card. This could create financial difficulties for the remaining account holder.
What to know before getting a joint credit card account
Before jumping into a joint credit card account, consider the following:
Privacy concerns
As each account holder has full access to the account, there is no privacy when it comes to a joint credit card account. Everything from purchases to payment amounts will be visible to both account holders.
Rewards and benefits
Consider which rewards and benefits are important to both account holders. It’s essential to decide in advance how rewards will be shared and find a card that offers benefits that both can enjoy.
Impact on credit scores and interest rates
If one account holder has a higher credit score, the joint account might qualify for a higher credit limit or lower interest rate. Conversely, a lower score could potentially drag down the partner’s score.
Alternatives to joint credit card accounts
If a joint credit card account doesn’t seem like the right fit for you, here are some alternatives to explore:
Joint bank account
Opening a joint bank account can be a good option for managing shared expenses. This allows you to pool resources and share expenses while maintaining separate credit card accounts.
Authorized user
Adding an authorized user to your individual credit card account is an alternative to a joint credit card. An authorized user can make purchases with the card, but they are not responsible for paying off the balance or any fees.
Prepaid or reloadable debit card
A prepaid or reloadable debit card can be used like a credit card but doesn’t require a credit check or credit history. Keep in mind that these cards won’t help raise your credit score like a credit card account would.
Cosigner
Instead of a joint credit card, consider having a cosigner. A cosigner vouches for someone who is applying for a credit card, telling the credit card company that they will be responsible if the cardholder can’t pay.
Personal loan
If you need to finance a large purchase or an unexpected expense, a personal loan may be a good option. With a personal loan, you can borrow a lump sum of money and make fixed payments over time.
How do I get a joint credit card?
Obtaining a joint credit card involves the following steps:
- Find a credit card issuer that offers joint credit card accounts.
- Apply for the credit card with your co-applicant.
- Provide personal information for both applicants.
- Agree to the terms and conditions of the card.
- Receive the credit card once your application is approved.
Remember, both account holders are equally liable for any debts accrued on the joint credit card account. Carefully consider the financial implications before adding someone to a joint account.
Can I add someone as a joint account holder?
Yes, you can add someone as a joint account holder, but it depends on your credit card issuer. To add a joint account holder, contact your credit card issuer, provide their personal information, and agree to the terms and conditions of the card.
However, be aware that both account holders are equally liable for any debt on the account. Therefore, think carefully before adding someone as a joint account holder.
Wrapping Up
While joint credit card accounts can be a useful tool for couples or family members, it’s crucial to weigh the pros and cons before opening one. Remember to consider alternative options such as adding an authorized user or opening a joint bank account. Take the time to understand the financial implications and choose the option that best suits your needs.
For more tips and information on personal finances, visit Personal Finances Blog.
TIME Stamp: Joint credit cards aren’t widely available, and the advantages may not always outweigh the downsides. While they can be beneficial for certain situations, alternative options should also be considered before making a decision.
Frequently asked questions (FAQs):
- Can two unmarried people have a joint credit card?
- How do joint credit cards impact credit scores?
- How old do you have to be to have a joint credit card?
Remember, it’s important to understand the terms and conditions of the specific credit card issuer before applying.