You might get a joint credit card account with a spouse, partner, or even a child to simplify bill paying, to merge your lives, or to help that person get a better credit score. Managing a joint credit card account isn’t always easy. You have to discuss everything you’d automatically decide when you have your own credit account.
Co-Signer vs. Authorized User
To share a credit card account, you can add a second person as an authorized user or as a joint account holder, also known as a co-signer. An authorized user isn’t legally responsible for making payments on the credit card but can make purchases on the account. Joint account holders are equally liable for making credit card payments. Both options have benefits. Before deciding which to choose, carefully consider your own situation.
Some banks report the activity of authorized users to the credit bureaus. This means so parents who want to help their children build credit sometimes will add them as authorized users to their accounts. Or, if one spouse has a low credit rating, the partner with the higher rating might add the other as an authorized user for the same purpose.
Not all card issuers report the activity of authorized users to credit bureaus, so be sure to confirm their practices before adding someone to your account.
Joint accounts are more common in relationships that involve equal financial responsibilities. Credit card issuers typically do not allow a joint account holder to be added after an account already exists, so both parties need to apply at the same time. Both parties share in the benefits and responsibilities just as they would with a joint bank account.
Managing a joint credit card is easier when both account holders have similar spending habits and financial goals.
Banks That Offer Joint Accounts
Not all card issuers offer joint accounts as an option. As of 2019, US Bank and PNC Bank are two examples of credit card issuers that still offer the option. Most other popular banks have moved away from the practice, but they do allow account holders to add authorized users. If getting a joint credit card account, be sure that this is what you're getting. Policies and practices change frequently, so issuers may add or remove the option for joint accounts at any time.
For a joint account, both cardholders will need to supply their personal information on the application, and the card issuer will run a credit check on both applicants. The credit scores and credit backgrounds of both applicants will be considered when the issuer decides whether or not to approve the application and what terms and limits will be set if it is approved. No matter how good your credit is, you should expect a low credit limit and a high interest rate if your co-signer has poor credit.
The Ramifications of a Split
If you break up with your joint account holder, both of you remain responsible for paying the credit card bill. Not even a divorce changes the terms of the original contract. If the judge says each of you pays half the bill, and your ex doesn’t keep up their end of the deal, the credit card issuer doesn’t care—you’re both still liable for making payments. You also should be wary of revenge spending—when an angry ex runs up the credit card bill and doesn’t bother to repay it.
The credit card issuer may not let you close the joint credit card account until the balance has been repaid, so the other account holder could keep charging while you work to pay off the balance.
Closing an account is likely not the best option for your credit score since it will reduce your available credit and possibly shorten the average age of your credit accounts. However, it probably remains the best option after a split in order to prevent any further problems.
An account holder can remove an authorized user at any time, but authorized users may have difficulty removing themselves from an account by themselves, depending on the policies of the card issuer. Either account holder on a joint account should be able to close the account. If there is disagreement over how to handle the closing of an account, the terms should be outlined in a divorce agreement.
Sharing a credit card account with someone else does not have to be difficult, but there is planning involved that requires account holders and authorized users to discuss what they will use the card for, when they will use it, how they will pay for it, and more. These are some issues to keep in mind:
To maintain good credit, the maximum balance you keep should be no greater than 30% of your credit limit. Credit bureaus value available credit, so the higher your balance, the less credit you have available and the bigger the hit your credit score will take. Communicate with your partner about staying below the 30% threshold.
- Purchase limit: Set a limit on how expensive any purchases can be without first discussing the decision. For example, you might decide that you both have to agree on any purchases of more than $200. That way, there are no surprises when you come home with an expensive item or when the bill comes.
- Communicate: Even for purchases less than the limit you've set, it's a good idea to share that information so the other account holder knows about any pending transactions that will impact your available credit. Understanding your partner's spending habits is a big part of this. If you’re a big spender and your partner is extra frugal, you both need to understand how that will affect sharing a credit card.
- Check the balance: Online apps have made it easy to track spending, and most credit card accounts will update in real time—or close to it—when purchases and payments are made. Make it a habit to check your balance before using your card. If online banking is unavailable for your account, a quick call to the customer service department can accomplish the same thing.
- Who pays the bill? If the two of you pay the bills together at one time out of a single account, deciding when the bill will be paid is easier. If that’s not how bill handling works in your home, you need to decide upfront which one of you is going to pay the bill and how the other account holder will contribute.