Is sharing a credit card with your partner a recipe for financial disaster? Or is not sharing a credit card a bad sign for your relationship? We’re not relationship counselors, but we can walk you through the pros and cons of getting a joint credit card. As with all major financial decisions, opening a new credit card is not to be taken lightly. After all, your credit score is at stake.
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Why It’s a Big Deal
Navigating the world of personal finance as a couple can be tricky. When partners have different incomes and spending habits, crafting a household budget gets even more complicated. If you and your partner are both working, it’s likely that you’re sharing some expenses, whether you split bills evenly in half or divide them according to an income-linked formula. But it’s one thing to combine finances when it comes to making mortgage payments, tackling utility bills or using a family plan for your smartphones. Credit cards are in a different category.
Why? Because credit card debt can balloon so quickly. If you forget to pay a $100 electricity bill, you’ll get a reminder and a possible late fee. If you neglect your electricity bills for months at a time, the power could go off. In general, though, it’s easy to bounce back from a missed utility bill. But if you forget to pay a $2,000 credit card bill, you’ll get a late fee and get slammed with interest on 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 months. Even if you get the credit card debt under control quickly, your credit score and your partner’s score will take a hit. In other words, it takes a lot more trust to share a credit card than it does to split a rent or utility payment.
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Joint Credit Cards: The Pros
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.
Another advantage to having a joint credit card is that it means one fewer bill each month. And wouldn’t we all like fewer bills to juggle? Just remember that if you and your partner open a joint credit card you’ll still have to develop a plan for paying the bill. Will the money come from a shared checking account that you both contribute to? Will you contribute the same amount each month, or different amounts depending on who earns more? Will one person be in charge of the credit card bill while the other pays for housing? If so, how do you make sure that each person is paying a fair share? Complicated, right?
Joint Credit Cards: The Cons
The biggest potential downside to opening a joint credit card with your partner is nonpayment. If your partner racks up charges you can’t afford or neglects to pay a bill you thought he or she was taking care of, your credit will take a hit and you’ll be liable for payment. That’s right. Just because you didn’t charge those golf clubs doesn’t mean you’re not responsible for paying them off.
In most relationships, non-payment or over-spending stem from honest mistakes or carelessness. But in some cases, partners or ex-partners can use a credit card as a weapon, intentionally ruining the couple’s shared credit. This has been known to happen in cases where one partner flees an abusive relationship, the idea being that a poor credit score will make it harder for that person to set up on their own after leaving their ex. Some state legislatures are taking steps to make it easier for people (usually women) to get charges stemming from an abusive relationship removed from their credit report, but in the meantime it’s a risk to be aware of.
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The Authorized User Approach
Making someone an authorized user on your credit card is a step down from sharing a joint credit card. An authorized user can spend, but doesn’t have to pay. Sounds great, right? That’s why the authorized user approach is popular in families, with some parents adding their children as authorized users on their account. In many cases, the credit card shows up on the authorized user’s credit report even though the authorized user doesn’t pay the bill. If you want to help a child or partner build credit by adding him or her as an authorized user, check with the credit card company to see if they’ll report to the credit bureaus on the authorized user’s behalf.
Of course, if you’re an authorized user and the primary account holder stops paying the bill, you’ll wish that credit card had never been added to your credit report. Your score will take a hit for a bill you never received. This can happen when parents experience an illness and, unbeknownst to the child, fall behind on credit card payments. Like sharing a joint credit card, being an authorized user on someone else’s card involves some risk.
Approach joint credit cards with caution. Sharing a credit card isn’t the same as sharing a checking account or dividing up household bills. There’s a lot more that can go wrong with credit cards, and it takes years to recover from a negative credit event. If you decide to take a leap of faith and open a joint credit card with your partner, you’d be well served to keep using and paying off a credit card that’s in your name only. That way, you’ll be building credit on your own terms, and you’ll have a buffer if anything goes awry with the shared card.
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