First things first, what is a joint credit card and how does it work?
Theoretically, there are actually two ways you can share a credit card. However, the permissions and responsibility of debt vary, depending on the type of credit card contract. Below, we take a look at the two options for sharing a credit card account.
Credit card application option one: one account two cardholders
A true joint credit card is when two people have credit cards linked equally to an account with one line of credit. Both cardholders are able to make transactions using their cards and have equal access to make changes to the account although, some changes – like closing the account – require the consent of both cardholders. Lenders consider the incomes and credit ratings of both parties when they make a credit card application for a joint card.
Similarly to joint bank accounts, joint credit cards represent a substantial commitment, as both people on the credit account are legally liable to repay the balance on the account. Joint credit cards are designed for people who trust each other implicitly, such as family members or long-term partners. They are not designed for new or unstable relationships, where one partner may take advantage and leave the other person to pick up the bill.
Credit card application option two: primary card with additional cardholders
Most standard credit cards – not necessarily “joint credit cards” – allow the account holder to add additional cardholders to their line of credit. In this scenario, one person is the primary cardholder and is legally liable to repay all transactions for the account; the other person, who has been added to the account, is the secondary cardholder, often referred to as an additional cardholder or supplementary cardholder.
Some credit card providers offer an additional card, or even several additional cards, at no extra cost. However, not all do, so it’s worth checking whether there is an annual fee attached to any additional card, before you sign up.
If, as a couple, you’re considering this option, there are some key points to keep in mind.
In general, an additional cardholder misses out on the benefits they’d have enjoyed if the card had been in their name. For example, their spending and repayments on the card won’t affect their personal credit rating, so, if favourable, it won’t help with any future credit or loan applications.
Secondly, in most cases, additional cardholders cannot redeem any credit card rewards that have been earned through the primary cardholder’s account, even if they’ve contributed the most towards earning the points!
If you’re interested in this joint credit card option, once you have carefully weighed up the pros and cons, you can compare credit cards that don’t charge you to add on additional cardholders by using Canstar’s credit card comparison tools.
Credit card application for joint credit cards – what else is there to consider?
While a joint credit card can make a lot of sense, particularly if a couple lives together and shares a lot of expenses, it’s really important to think about communication around money, first. If shared money goals and budgets aren’t properly communicated, getting a joint credit card can be a recipe for disaster.
For example, if a primary cardholder adds another cardholder to their account and that person goes on a spending spree, the primary cardholder could be left holding that debt should the partner leave. However, if you choose to have one credit card account jointly held by two cardholders, responsibility for the debt will remain equally shared should the union disintegrate.
In general, a joint credit card only makes sense if it adds to the convenience of sharing life together. It’s vital that both partners agree on how much they will contribute to repaying the joint credit card each month.
Canstar takes a look at the pros and cons of joint credit cards in more detail:
Benefits of a joint credit card
Some of the benefits of a joint credit card include:
- You only pay one set of annual fees and transaction fees, instead of paying fees on two separate credit card accounts.
- Joint payments, such as rent and electricity bills, are easier to manage using one credit card account.
- You can earn credit cards rewards faster with two cards earning points towards one account. If you get a joint credit card where both of your names are attached to the account, then you can also both redeem the rewards.
- Both cardholders can redeem rewards.
- It is easier to get a clear picture of your overall financial situation as a couple, so each person knows how much they can afford to spend.
- If one person’s credit rating is not amazing, but the other person’s credit rating is, it balances out in the application process. So, a joint credit card application is more likely to be approved than an individual application by a person with a poor credit rating.
- It enables a couple to work together towards a common goal, such as paying off a debt, saving for a house deposit, etc.
- When you can each see what the other person has spent, you have a clearer picture of your combined financial situation and how much money is left to pay for upcoming expenses.
- A joint account can sometimes reduce the temptation to overspend, because each person knows their spending is no secret from their partner.
Downsides of having a joint credit card
Some of the downsides of having a joint credit card include:
- There’s always the risk that the “what’s yours is mine” attitude can be unhelpful for couples where one, or both partners, are not prepared to be accountable for their spending.
- If a couple splits up, a joint credit card can leave one person stuck paying off the other person’s debt
- Any debt from an ex partner on a joint credit card can leave a black mark on your own credit record.
If you don’t want to share a credit card, there is a third option: a couple can use a joint credit card for expenses (housing, fuel, electricity and groceries) and separate cards for personal, discretionary spending.
Whatever you decide, make sure you compare your options
Deciding whether or not to get a credit card requires some careful thought about you (and your partner’s) personal financial situation and spending/savings habits. A one-size-fits-all solution doesn’t exist. But, whatever you decide, make sure you explore what is happening in the market, first. Research the rates, fees and features attached to the available cards. And, think about how you and your partner spend money and repay debt. It’s well known that finances can cause tension in relationships. So, make life a bit easier on yourself by having some of the difficult conversations up-front. Set aside some time with your partner to weigh up the available credit card options to help choose an option that works for you both.