You’re married — or perhaps just in it for the long-haul with your partner — so you need to manage your finances together, which includes your credit cards. In most cases, banks no longer issue joint accounts to customers. However, they may allow you to select an authorized user or serve as a co-signer, which can be helpful to a significant other who has less-than-stellar credit.
No matter what type of credit card arrangement you have, successfully managing the account is central to the financial health of each of you. Read on to find out how couples can manage a joint credit card the smart way.
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Joint Credit Card vs. Authorized User
A joint credit card is not the same thing as allowing another person to be an authorized user on your credit card. Equally important, the vast majority of credit card issuers no longer offer joint credit cards, with U.S. Bank being the most notable exception.
With a joint credit card, both users of the card are fully responsible for any balances owed on the card. Both users are also on the hook for any credit score impact, positive and negative, that use of the credit card causes.
With an authorized user, on the other hand, only the primary credit card holder is held responsible for whatever charges the authorized user makes. But credit score impact, both positive and negative can occur to both users, depending on how the primary cardholder handles the account.
Joint Credit Card vs. Co-Signer
Joint credit cards and cards with a co-signer are also different. A co-signer credit card account involves a primary account manager with a co-signer who is commonly used to help build the primary’s credit profile. With this type of account, the co-signer provides financial backing, agreeing to cover any unpaid debts, rather than being an authorized user.
Thanks to the co-signer’s backing, the primary credit card account holder can get approval where usually their own credit standing or history wouldn’t normally merit it. Because the co-signer is not an authorized user, he or she doesn’t get access to funds or even account information per this arrangement.
On the flip side, however, if the primary account holder misses a payment, it could have an impact on the co-signer’s credit.
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Managing a Credit Card With Your Significant Other
Whether you’re thinking about adding your significant other as an authorized user, a co-signer — or if you’re considering being co-owners on a joint credit card — you’ll need to know how to effectively apply for and manage your credit card as a couple. Here are some helpful methods to consider.
1. Be Upfront About Your Credit Scores and History
Considering you’re in the relationship for the long-haul, honesty and transparency is a must when it comes to an area of your lives as important as your credit.
Discuss your credit scores and history well before you apply for a credit card or other types of credit. The last thing you want is to get denied a credit card during the application only to find out it was because of your significant other’s credit history.
2. Discuss Any Debts You Have
Writing down the debts you and your significant other owe is the next crucial step. While this step might be stressful or embarrassing, it can also be a relief since it allows you to get all your obligations out into the open. Some basic points you and your significant other should go over include:
- Total debt
- Types of debt
- Individual account and loan balances
- Percentage of income that goes toward repaying debt each month
- Expected payoff with current payment schedule
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3. Figure Out Each of Your Responsibilities
Discuss your respective roles when it comes to managing your joint credit card. Work out which one of you will be responsible for paying the credit card bill each month and how much each one of you will contribute toward it. Assigning responsibility could be as simple as whoever made the charge on the credit card pays for it — or you could split the cost of repayment according to a ratio you work out.
Also, figure out what kinds of credit card purchases or decisions require approval from both of you. For example, using a joint credit card to buy a few groceries is very different from using it to make an expensive down payment on a car.
4. Build Your Own Credit
Even if you have a joint credit card, it’s important to build a diversified credit history that stands on its own. You should also have your own cards, naming you as the primary account holder.
And if you are a non-working spouse, don’t worry, you can still apply. The law states that as long as you are at least 21 years old, you can list any income on your card application that you have reasonable expectations of access to. So, if your spouse’s paycheck goes into your joint checking account, you can include it on the application.
Once you decide to build your credit, choose cards that best fit your needs, such as one that offers the lowest rate, cash back, or reward points and miles.
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5. Practice Good Credit Behavior Together
Whether you’re managing your own credit card account or an account with someone else, it’s crucial to pay your bills on time each month. If you or your loved one has had problems with timely payments in the past, implement a system to prevent this, such as scheduling automatic payments or payment reminders.
Credit utilization, which is the ratio of your outstanding balance to your total credit limit, is also a major factor credit score calculations. Both you and your significant other, therefore, should methodically budget to pay off debts. Also consider funneling any extra money you receive toward your debts, which will help reduce what you owe much more quickly.
You can also utilize balance transfer credit cards, which often have a low — or even 0% — introductory APR and can save you hundreds or thousands of dollars in interest. Simply transfer your high-interest debt to this type of card, and pay it off before the regular interest rate kicks in.
Another area you and your spouse should keep an eye on is old credit card accounts. Just because you’ve decided to get a joint credit card or make your spouse an authorized user does not mean you should close out credit card accounts from the past. Maintaining older credit card accounts with low balances and good payment history can benefit your credit score.
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The Bottom Line
Worthwhile benefits are available to all couples when using credit. If you do choose to have a joint credit card, or another arrangement, work together to manage it responsibly. Finances can be very trying on relationships, which is why honesty, transparency and taking responsibility is so important when making joint credit decisions.
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