Many married couples have joint bank accounts, joint mortgages, and joint auto loans, so a joint credit card may seem like the next logical step. However, there are a few things that you should know before you apply, such as the pros and cons, as well as an alternative that may accomplish the same main goals.
Here's some information on joint credit cards that could help you make the best decision for your own situation.
What is a joint credit card?
Just like a joint checking account, a joint credit card is an account that both parties share equally. Both account holders are equally responsible for any charges, and can also make changes to the account. Just to name a few things, both holders of a joint credit card can initiate disputes, transfer balances, report their cards lost or stolen, request a limit increase, and close the account. However, they generally cannot remove the other account holder's name from the account.
Benefits of joint credit cards
There are certainly some good reasons to obtain a joint credit card, especially with a spouse or child over 18 years old. Just to name a few:
- If one applicant's credit or income is significantly better than the other applicant's, it may be possible for one person to qualify for a credit card that he or she otherwise wouldn't be able to.
- Both account holders' credit will benefit if the account remains in good standing.
- Joint credit cards can simplify a couple's finances by consolidating all spending on one bill.
Joint credit cards can be great, as long as the bill gets paid, and both account holders are on the same page as far as charging purchases to the account is concerned. However, there are some reasons to be cautious.
- If a couple separates or divorces, both parties are responsible for any debts—even when one person admittedly made all the charges. It may surprise you to learn that a divorce court cannot alter the terms of a joint credit card agreement.
- Any delinquencies or defaults will show up on both account holders' credit histories.
- If one account holder dies, the other is still responsible for paying the debt.
- If both account holders have different spending habits—one is frugal and the other is a shopaholic—a joint credit card can cause friction in the relationship.
A better alternative?
Instead of applying for a joint account, a better idea may be to simply apply for a credit card on your own, and then add your spouse/child/etc. as an "authorized user." An authorized user has the benefit of being able to make purchases with the credit card account, but is not legally responsible for any charges, nor are they allowed to make changes to the account or redeem rewards. And the account is still reported to the authorized user's credit report, so they could still get a credit boost if the account is used responsibly.
Basically, an authorized user accomplishes the main goal of applying for a joint credit card—two people can charge purchases to the same account. However, the legal ownership and liability of the account is greatly simplified.
In fact, many major banks don't allow joint credit card accounts, and I'm fairly certain that the legal complexity associated with joint accounts when relationships go sour has a lot to do with it. American Express has never offered joint accounts (but does allow authorized users), and Chase, HSBC, and Capital One have all discontinued joint accounts during the past several years.
The bottom line
While there are certainly some potential benefits to opening a joint credit card account, most of them can be accomplished by simply adding an authorized user to a single-owner account. If you do decide to open a joint account, make sure you understand the risks, and that both account holders have an agreement on how to handle the account in case the relationship doesn't last forever.
It may not be the most pleasant topic of conversation, but just like making a will, it's better to talk about it before something happens.