You share everything with your partner. You have a home together, a couch, kitchenware and maybe even a dog. And because you share most of your living expenses with this person, the next logical step seems to be opening a credit card together.
However, before you take the plunge and open this joint credit card, make sure that you are fully aware of the risks involved.
How Joint Credit Cards can be Risky
Two people who apply for a joint account will be evaluated equally by the credit card issuer. This means that the approval decision, spending limit and interest rate will be determined by the credit scores and reports of both applicants. Also, all of the account activity will be attributed to both parties, no matter who makes the purchases, the payments or the possible mistakes.
Here are two potential joint credit card scenarios:
Alex and Jamie
After sharing an apartment for two years, Alex and Jamie apply for a joint account. Alex has great credit, but Jamie's rating is less than perfect, so while the couple is approved for the card, the terms are not ideal. But Jamie is determined to earn a better credit score through responsible card use and consistent, timely payments. Both Alex and Jamie agree to use less than 30% of the card's limit at all times, and to never be late with a payment. They are successful. Alex's credit rating remains stellar, and Jamie's score gradually improves over time.
Jean and Pat
Jean and Pat have only lived together for about eight months before deciding to open a credit card together. Both have similar, fair credit scores. Pat has a strong interest in growing a stronger credit score, and Jean seems to be on board. This is a project that they are going to do together, and they are excited about building their credit profiles and maybe blogging about their experience. Only, Jean has a shopping addiction. It starts with small secret purchases, but soon enough, hundreds of dollars are charged behind Pat's back. Payments are missed. And with a wounded credit score, Pat is forced to rethink both the intended personal finance blog and the relationship.
So, opening a joint credit card with a partner can either be a mutually beneficial plan or a complete disaster. And, clearly, good communication is the key to being successful with a shared account. If there is any doubt in your mind about your partner's ability to be responsible or even your own tendencies to overspend, it may be best to hold off on making this commitment.
Joint Credit Card Alternatives
If you want to share financial responsibilities with the special someone in your life, you don't necessarily have to open a line of credit together. There are alternative options to consider.
- The Joint Checking Account: If you and your partner open a checking account together, there are still risks involved, but at least your credit rating won't be on the line.
- The Authorized User: If Partner A has a good credit score and Partner B does not, it might be safer for Partner A to just make Partner B an authorized user on an existing credit card. This way, Partner A has a little more control over the account.
Even if you and your partner maintain separate accounts, you should still be open about your spending habits. If you are working towards common goals, it only makes sense to stay on the same page with your finances. Money problems can cripple or even destroy otherwise happy relationships, so try to make avoiding financial pitfalls a team effort.
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