As spending habits differ from person to person, getting a joint credit card for a couple can either be a huge financial risk or an advantage. This article will introduce you to the pros and cons of joint credit cards for couples.
According to a telephone poll conducted in 2008 by GfK Roper Public Affairs, nearly 19% people who shared credit card accounts with others reported that the shared account had led to arguments. About 7% of those shared account holders canceled their credit cards because it led to conflicts in their relationships.
[Source: creditcards ]
These days, many people opt for a joint credit card account. While there are several advantages of having joint credit cards, they also come with a share of disadvantages. Having a joint credit card does help in enhancing the credit score of a person who has a not-so-favorable one. However, as one is not well-aware about the spending habits of the other, it can lead to a credit card debt for both, making the non-spender liable for payment. Hence, unless you are absolutely sure about the spending habits of your spouse or girlfriend, do not take a hasty decision of getting a joint credit card. There are certain pros and cons of joint credit cards for couples, which you should know before opting for one. This article will tell you what a married or dating couple should know about joint credit cards.
Pros of Joint Credit Cards for Couples
Ease the Management of Money
Consider that you and your spouse own two credit cards each. Imagine how tedious it would be to check the statements, compare the slips and look for discrepancies, remember the due dates, and make timely payments for multiple cards. Also, having multiple cards can lead to excessive expenditure which may go unaccounted for, till the bill arrives. Hence, having a joint credit card is a good option. You have to manage a single card. This can help you save your time, effort, and money.
Help Build Credit
Credit-building is one of the advantages of joint credit cards. Your spouse might not have a good credit history. Once you opt for a joint credit card, it will help her get a better credit. In fact, if her bad credit history does not allow her to get a credit card, having a joint credit card account will enable her to own one. If you ensure that you pay all your bills on time and keep the credit balance low, you will be able to build credit for yourself, as well as your spouse. This will help your spouse erase her bad credit history.
Help Benefit from Low Interest Rates
Due to a poor credit standing, your spouse may not be able to avail the benefit of lower rates of interest. However, when you both own a joint credit card and have a good credit history, it will allow her to benefit from lower interest rates. This will also help you both to qualify for mortgages that offer the best financial terms. A good credit score on a joint account may also help you get a credit card with a higher credit limit.
Earn Reward Points
Two people using a single credit card means that your reward points will increase. The usage of the credit card will increase and with it, there will be a steady hike in the number of reward points, which you will be able to redeem and utilize to your advantage.
Help Maintain Transparency
Many times, there is tension over financial transparency in a couple. This happens because they do not have the same financial goals and like to keep their transactions a secret. While one may believe in saving money, the other may have spendthrift habits. This can create problems and put the relationship under strain. However, if you have a joint credit card, it accords an openness about the finances and about individual transactions. When you share a credit card with your spouse, it means that you believe in each other’s financial decisions. This helps in building trust and in strengthening the relationship.
Help Share Responsibility
Most of the time, joint credit cards have a higher credit limit as compared to the ones owned by individuals. However, as both the spouses can easily check the credit card status, they tend to spend responsibly and with the consent of each other. Also, if they do not have the budget to purchase a certain thing, they refrain from buying it and wait till they have gathered enough balance. Not only this, as two people share the responsibility of making the payment, they can actually buy expensive or luxury goods which would otherwise be impossible to procure on an individual credit card.
Ease Payment of Bills
Many couples share the electricity bill, cell phone bill, rent payment, bank accounts, grocery shop bills, and many other household bills. Hence, it becomes easier to share a credit card to jointly pay all these bills on time. Not only this, but having one bill less helps the couple use their income wisely. Having just one card ensures that its payment is made on time. Also, it helps manage the bills and finances better.
Cons of Joint Credit Cards for Couples
May Lead to Problems in the Relationship
Many times, joint credit cards act as a bone of contention between partners. This happens when one is a reckless credit card user while the other believes in using it wisely. This change in the attitude towards spending, can cause damage to the relationship. The couple may have arguments, differences of opinion, and even a breakup because of different spending habits and a difference in the approach towards credit card use. Hence, unless you both have decided some credit card usage rules and vouch to follow them, getting a joint credit card can do more harm than good.
May Lead to Issues Post Divorce/Breakup
Just imagine what will happen if you share a joint credit card with your spouse or girlfriend and over time, decide to break up. If you have divorced on a bitter note then paying the credit card bill will become even more difficult. If your ex-spouse is delinquent, then she will definitely try to spend a lot in order to make you ‘pay’ for it. Irrespective of what the divorce decree dictates, the credit card issuing company will hold the original credit card account to be true. This means that you and your ex-spouse will be liable to pay the bill irrespective of who has made the purchases.
Getting Off the Account becomes Difficult
Once you sign-up for a joint account, it will not be easy to just get off the account. This is even more stringent when you have an outstanding balance on the account. Unless you pay the outstanding balance in full, you will not be entitled to make any changes to the account. Hence, it is advisable that you first pay the balance off and withdraw your name from the account.
Can Lead to Unfair Sharing of Responsibility
The main problem with this kind of financial arrangement is that even the person who has not spent using the credit card is held liable for a credit card mess. Both the persons are held equally liable and legally responsible for the payment of the debt. Credit card companies have the right to recover the dues from any one in the couple. For instance, even if you did not agree with your partner’s decision to spend extravagantly on a treadmill, you will be pursued for the payment of the amount that she has charged on the credit card. This means that even if you are innocent, you could be sued for the amount and the credit card company could even garnish your wages.
Can be Wrongly Used as a Financial Tool
Many people use a joint credit card as a financial tool to ‘ax their ex’ after a bitter divorce or break-up. Knowing that the other person also shares the liability of the bill payment, they go on a shopping spree in order to seek revenge. This not only makes the other person pay for the bill but it also hurts his credit standing. In fact, if the defaulter does not have a good credit history in the first place, he does not stand to lose anything even if the card gets maxed out.
Increase the Risk of Cards Maxing Out
Imagine a scenario where you own a higher limit joint credit card with your spouse. Consider that you are a meticulous credit card user while she is a spendthrift. One day you are shocked to see the statement that your credit card has maxed out because of her extravagant spending. As a considerable percentage of your credit score will depend on the usage of your available credit, this will not only cause her credit score to go down the drain, but will also pull yours along with it. Also, if you cross your credit limit you may incur additional over-the-limit charges. Your rate of interest may also increase because of this. Hence, it is best to avoid joint credit card accounts to avoid your credit card from maxing out.
Can Affect the Credit Ratings Negatively
The risk of a negative impact on your credit rating is among the disadvantages of using joint credit cards. If you have a good credit score and your spouse has a bad one, getting a joint credit card can help enhance her credit score. However, just imagine what would happen if she does not mend her spending habits. Your credit score will also suffer because of that. If she causes the card to max out, to land you in a credit card debt, or even defaults on regular payment, it will all reflect on your credit score as well. Getting a joint credit card with a person who has a bad credit history is a risk in itself. This is more impacting in case of a break up. Hence, you must take this decision only after weighing all the pros and cons of using a joint credit card.
Making Joint Credit Cards Work
▸ Check your balance regularly.
▸ Intimate each other if you are charging something on the card.
▸ Set a budget for spending.
▸ Decide and distribute the bill amount.
If your ex-spouse is misusing your joint credit card, write to your credit card issuing company and make them aware of the situation. Ensure that you tell them that once the balance is paid, the account should be closed. Send the letter through a certified mail, in order to use it as a proof. Do this at the earliest, or it may ding your credit score. On weighing the pros and cons, decide for yourself if your spouse is worthy enough to be trusted with your money and credit. Remember, if the relationship does not work out the way you expected it to, you will also have to face the financial ramifications. Hence, it is advisable to keep separate credit cards.
Now that you know about the advantages and disadvantages of joint credit cards, make sure that you have strong reasons before you go on to get one. Think twice before mixing money and relationships.