Joint credit cards are less in use as compared to some years back, but still, they are useful for family members or partners who share their finances. Getting into a financial agreement with someone needs open communication and trust which makes joint credit cards a big responsibility for the cardholders.
Both people sharing a joint credit card can make transactions with the card and card history will show up on both their credit reports. The liability of card payments is equal for both people no matter who made the transactions. In case of a payment default, the issuer can contact any one cardholder for the payment of dues.
Thus, a joint credit card can be a nice option for family members but it comes with a big responsibility. We’ll discuss how does a joint credit card work, its pros and cons, and other useful stuff related to it.
Joint Credit Cards – How do they Work
A normal credit card has the name of just one primary cardholder but in a joint credit card, there are two primary cardholders. Both persons have their own copy of the card and have equal access to use the card. After both people are approved, they can make transactions with their cards as they want.
However, the monthly credit card bill payments is also the joint responsibility of both cardholders, even if only one person spent money. The cardholders can mutually agree between themselves on how to divide the outstanding card payment.
One good thing is that both the cardholders can help each other in maintaining a high credit score by timely payments of their dues. Also, there must be an understanding on monthly spending as a high credit utilization ratio can bring credit score down
Things to Consider when Getting Joint Credit Card?
With a joint credit card, both cardholders share equal liability and mutual trust and understanding between them is very important. Here are some things to consider before getting a joint credit card –
- Both cardholders are 100% responsible for the credit card and their credit history and score will also be dependent on their partner. Therefore, you must trust your partner to use the credit card responsibly. There should be clear communication regarding monthly budget, spending habits, etc.
- Both of the cardholders’ credit history and credit score will be affected by the joint credit card. A person with a high credit score can help their partner with a low credit score to get a credit card. However, if one partner has a very low credit score, it can disqualify both of them from getting approved for the credit card.
- Once the joint credit card is approved, you cannot remove your partner from it. Either you can agree on a payment plan to pay off dues or any one partner may transfer balance to their individual account to pay off the debt.
- If you are not ready to commit to a joint credit card with a partner, you can try out other options. You can add each other on an existing account as authorized users or you can open a new individual account with the partner as a co-signer.
Pros and Cons of a Joint Credit Card
If you are planning to get a joint credit card with your spouse, partner, or your child, go through these pros and cons before you make your final decision.
Pros of Getting a Joint Credit Card
Sharing of the Credit Card Bill – When you live with your partner, you share the water, electricity, internet, and other utility bills. Similarly, you both can share your credit card bill as well with a joint credit card. You can agree on your payment plan and can also decide which of your cards to pay off first.
Help Your Partner Improve their Credit Score – If your partner has a low credit score, you can help them improve it through a joint credit card. First of all, your partner may find it difficult to get approved for a credit card with a low credit score, and you can help them get approved. Then, if you manage the joint credit card responsibly and pay your dues in time, you can help improve your partner’s credit score.
Qualifying for Better Terms – When you your card in the right way and pay off your outstanding dues in time, both the cardholders’ credit score will increase. With a higher credit score, you or your partner may get access to better terms for a loan or a credit card. You can get approved for future credit at lower rates and convenient repayment terms.
Earn More Reward Points and Benefits – When you share a joint credit card with your partner, it means more spending and more reward points earned. You will find it easier to earn your signup bonus or reach your spend-based milestone benefits on sharing the credit card with your partner.
Cons of Getting a Joint Credit Card
Both Cardholders are Liable for Repayment – You and your partner are both equally responsible for the credit card payment and may face legal issues if the payment is not made on time. Even if you pay your share and your partner does not pay, then also you can be sued for non-payment of dues.
Disagreements can Affect Your Relationship – Joint credit cards can lead to disagreements on repayment or spending habits that can spoil your relationship. It is recommended to create a reasonable plan with your partner before you get a joint credit card so that there are no misunderstandings related to your card.
Divorce or Breakup can make Card Management Difficult – If you get into a divorce or breakup with your partner, the terms of the credit card will be the same for both of you. If your ex-partner do not pay their share of the dues, you will also be responsible for this and your credit score can take a hit.
Late Payments will Affect Credit Score of Both Cardholders – As a joint credit card’s history appears on both the cardholders’ credit report, in case of late payments, both your credit scores will go down. You cannot shield your credit score by paying your share because if your partner does not make the payment on time, both of yours’ credit score will be affected.
It is good to have a joint credit card with your partner in some cases, while sometimes it is wiser to have your own separate credit cards. Joint credit cards can make finances simpler for partners, but it is a demanding commitment where things could easily go wrong.
If you can manage your shared finances with your partner in a relationship and control each other’s spending, then you can consider joint credit cards in India. However, if you have any doubts regarding this or if you do not understand the implications of a joint credit card properly, then it is recommended to avoid it and get a separate credit card for yourself and your partner.