Joint Credit Card Accounts

Many happy couples want to share everything…share a meal, share a home, share a credit card. Wait! Share a credit card? Consider the risks and rewards of opening a joint account with someone, before you sign your name on the dotted line.

A joint account can be convenient if both people agree on how to handle credit and finances. Unfortunately, the decision to open a joint account may lead to trouble for some, when differences in financial habits come to light after opening a joint credit card account.

A joint credit account is one in which both parties agree to be responsible for the charges incurred, regardless of who actually made the purchases. The credit card company will consider the credit history of both when you apply for credit, and the credit score of each person can be improved or damaged by the way the account is handled when it’s time to pay the bills.

A joint account is different from being an authorized user on someone’s account; an authorized user gets a card in his or her own name to use but has no responsibility to pay for the charges. An authorized user’s credit score will not be affected, good or bad, by the account holder’s payment history.

FICO no longer factors payment history of an authorized user account due to exploitation of the credit scoring system by certain credit repair agencies.

People with poor credit would pay a fee to become an authorized user on an account with a stranger who earns a fee for allowing it. They would not actually get to use the account, but piggybacking on an account with an excellent payment history would boost their credit score.

This recent change in credit scoring will help to prevent further manipulation of the credit scoring system by agencies that profit from selling someone else’s good credit to people with poor credit.

When a joint credit card can make sense

A joint credit card may enable one with poor or no credit to get a better deal than if they had to go it alone. It may make sense, to prevent having to resort to a secured card or one with a high interest rate. The person with the better credit rating can help the other build their credit so that one day they can get a loan or credit card on their own.

Parents who want to help their children establish credit can use a joint credit account as an opportunity to teach their kids about personal responsibility and money management. A couple can benefit in the long term by bringing up the credit scores of both, so that they can one day get that mortgage with the best terms.

A joint credit account can simplify bill paying and budgeting. One statement every month will allow you to see at a glance how much is being spent in the household. Be sure to communicate to eachother about purchases made, so that one of you doesn’t mistakenly go over the credit limit.

If you have a joint account, you are each responsible to the other and should agree on large purchases; it’s not fair to make someone else pay for over-the-top luxury items if they didn’t want the items to begin with.

I can’t stress enough that when two people share an account, that they both should make spending decisions together. If you can’t agree on how to spend money, then you should never get a joint account.

A joint account can damage your credit and your relationship if you can’t agree on how to spend on credit, and how to pay the debt. Relationship issues often stem from concerns about money; you can avoid the problems by making a smart decision from the beginning.

Often better for you each to have your own card
If one of you is thrifty and the other a shopaholic, or one needs freedom to spend without approval from the other, you should probably keep your finances and your credit accounts separate.

Our parents automatically got joint accounts together when they got married, back in the day when many women stayed home to raise kids while most men made the financial decisions and earned a living to support the family.

These days it’s different; many women are independent and earn their own livings - even if they are married, with children. In these types of situations, there may not be a need to have a joint credit card.

By keeping your accounts separate, you can decide on your own how you want to use credit and pay your bills; you prevent yourself from being responsible to the other for things you don’t agree on. And if one of you makes a bad money decision, you don’t have to feel bad about damaging the other’s credit rating.

Parting ways when you have a joint account

Nobody ever plans on divorcing when they’re walking down the aisle, but many couples will someday face a break up. Splitting up is complicated enough without the money issues thrown in; if credit accounts are kept separate to begin with, it can eliminate a major source of conflict.

If you end a relationship with someone you have joint accounts with, it’s important to sever your financial ties completely. Divorce does not get you out of a joint account; you have to have your name removed from the account for you to not be financially responsible for it.

Credit card issuers will generally not let you out of your binding contract with them if there is a balance on your card; you will probably have to pay off the outstanding balance in full before any changes can be made to your account. After it’s paid off, either of you can close your account. You can then each reapply for your own individual account.

If you can’t close your account right away, you can still prevent the other from running up new charges that you’d be responsible for. Call the credit card company and explain that you and the joint account holder are going separate ways and you do not want to allow any new charges on the account. Then pay off the account as soon as you can so you can cut your financial ties to each other.

Some divorcing couples have gotten individual debt consolidation loans to help them take responsibility for their share of joint debt, allowing them to get on with their lives sooner.

Before you get a joint account with anyone, think about your reasons for doing it. If you both truly have similiar spending habits and common financial goals, then having a joint account together can be the right thing to do. Many couples successfully intermingle their finances and credit accounts, and their bond is strengthened from doing so.

However, if there's any issue concerning a lack of trust or different financial habits, you should avoid a potential pitfall by keeping your accounts separate.