Sharing a credit card can be a tricky situation. A lot of questions can arise when making the decision. Can sharing a credit card with your partner be a financial disaster? Is not sharing a card with them a bad sign in your relationship? Although we don’t have the answers to the relationship questions, we can give you them pros and cons of getting a joint credit card.
Why It’s a Big Deal
The world of personal finance for a couple can be difficult. This is especially the case when partners have different incomes and spending habits because it can make creating a household budget even more complicated. If both partners are working, there’s a good chance they share expenses, whether it is splitting the bills in half or by how much each party makes.
This is important to consider because credit card debt can grow quickly. For example, if you forget to pay a $100 electricity bill, you will get a reminder and a possible late fee. Or, if you neglect your bills months at a time, your power might get shut off. Normally, though, it is easy to bounce back from that type of bill.
However, if you forget to pay for your $2,000 credit card bill, then you will get a late fee and interest added to that $2,000. That interest might be charged at an even higher, penalty interest rate if you miss a payment, and penalty rates can stay with you for a long time. Even if you are able to pay off all the debt associated with your card, you and your partner’s credit score will still suffer as a result.
Pros of Having a Joint Credit Card
We’ve established that sharing a credit card is a high-stakes decision. Still, opening a joint credit card has some advantages. For one thing, it can help lift the credit score of the person who needs it more. For example, if your score is in the 600’s and your partner’s is 800, you’ll get more favorable terms on your credit card if you open a joint account.
After months of responsible, on-time payments, your credit score will rise. If you tend to forget bills, your partner can help you mend your ways – or pick up your slack.
An extra advantage of having a joint credit card is that you have one less bill to worry about each month. There will only be one credit card bill for the both of you. However, the question as to how to pay for that bill may come into question. Will there be a single joint account that you both fund? Will you pay the same amount each month or a different amount depending on how much each person makes?
Cons of Having a Joint Credit Card
One of the biggest downsides of having a joint credit card with your partner is nonpayment. If your partner racks up charges you can’t afford to pay or neglect to pay, both of your credit scores will take a hit. With these cards, just because you don’t make those charges, doesn’t mean you’re not responsible for paying them off.
In most cases, nonpayments or over spending are just honest mistakes or carelessness. In some cases, harming a partner or ex-partner’s credit score has made them unable to set up on their own after leaving their ex. Some state legislatures have begun making strides toward making it easier for people to get charges stemming from an abusive relationship removed from their credit report, but in the meantime it is still a risk.
The Authorized User Approach
A much safer method of sharing a credit card, this allows someone that you have authorized to receive their copy of your card and use it. Although they don’t have to pay, this gives you full control of this credit card, so if they overspend, you can cancel their card or stop payment at any time. This a popular method used between parents and their children. Parents will do this because the card will still appear on the authorized user’s credit report, and that can help them build credit.
If you’re considering joint credit cards, then do so with caution. Sharing a credit card isn’t the same as sharing a checking account or dividing up household bills. A lot more can go wrong with credit cards and it can take years to recover from negative credit.
If you do decide to open a shared credit card, continue using your personal card and building credit for it so that you have something to fall back on. For more posts like this, check out our list of bank guides!