How Does a Joint Credit Card Account Affect My Credit?

There are many ways people share their financial lives, and it's common to have a mortgage or car loan with a family member, partner or spouse. You can also share a credit card account. Although there is no right or wrong answer to whether a joint credit card account is a good idea, there are pros and cons to consider.

What's the Difference Between a Traditional and Joint Credit Card Account?

A joint credit card works like a traditional credit card, except the account is shared by two people instead of owned by one. Each account holder has a credit card, but the cards are linked to the same account.

The key difference with a joint credit card account is that the responsibilities and benefits are shared by both cardholders. Any card activity will affect both cardholders, and you are responsible for paying the card balance even if you didn't make any charges.

Pros and Cons of a Joint Credit Card Account

If you're considering a joint account, have a candid discussion with your co-applicant about the responsibilities that come with having a credit card in both of your names.

Pros

• An account owner with a lower credit score can get access to more favorable terms. If one of the cardholders has a spotty borrowing history or lower credit score, they can take advantage of the joint account holder's stronger credit history. Keep in mind, though, that lenders take into consideration both applicants' financial profiles when denying or approving a credit card application.
• It can help account holders improve their credit. If you keep the account in good standing by making monthly, on-time payments, a joint account can help improve the credit score of a cardholder who could benefit from a positive credit history. It can also be a useful way to establish credit for someone who needs it.
• There are fewer bills to manage. A joint account can make it easier to manage bills each month because the account holders' combined purchases appear on one statement. Additionally, both cardholders can take advantage of a credit card's features, such as redeeming points for rewards, airline miles or balance transfers.

Cons

• Both account holders' credit history is affected. If one cardholder goes on a spending spree or payments are missed, both account owners' credit scores can potentially be affected. Joint account cardholders are equally responsible for paying off the card's balance, regardless of who incurred the charges.
• Disputes over the card can cause relationship issues. A shared account can lead to disagreements between the cardholders over spending habits, debt repayment and account management.
• Changes in the relationship affect the account. If you divorce or experience another kind of separation, you'll need to close the account, remove one of the parties or otherwise figure out how to move forward with the account. It's also possible that one user could purposefully spend or skip payments to hurt the other's credit.

If you decide to get a joint credit card account, make sure you're both on the same page about what this entails. It's important that you understand you're both legally responsible for repaying the charges either one of you makes.

Talk Openly and Keep an Eye on the Account

When both parties are responsible about money and have an open line of communication on financial matters, that's a big plus. Agree to make payments on time, discuss major purchases in advance, and avoid getting too close to your credit limit.

With credit cards, it's important to oversee the card's usage. If you share an account:

• Regularly discuss household and personal expenditures with all cardholders.
• Regularly check the status of an account by calling the credit card company or setting up online access.
• Make sure the other account holder doesn't run up excessive charges you can't repay.
• Monitor your credit by checking your credit report to ensure that your credit score is healthy. You can check your credit report every 12 months for free at annualcreditreport.com.

As a safeguard, some creditors will allow you to limit the charges of the person you're sharing an account with.

Consider Establishing Your Own Credit

Although some couples share bank accounts, it's also common for both partners to establish credit on their own to protect themselves and loved ones from unforeseen circumstances, such as divorce, death or other life changes.

Here are ideas to consider if you have joint finances with a partner:

• Establish credit in your own name so that you also have your own credit history. Even if you don't have your own income, having your own credit accounts will allow you to have your own credit history.
• If you previously had credit under a different name or location, make sure the three main credit reporting agencies (Equifax^®, Experian^® and TransUnion^®) have your up-to-date and accurate information on file.
• If you were recently married or divorced and changed your name, ask creditors to change the name on your accounts.
• If you have shared accounts with family members, creditors should report information on these accounts to credit bureaus under the names of all card holders. Check to make sure they do.

Whether you have your own credit card or a joint account, remember to pay off your card balance in full each month if you can. Interest can add up quickly over time if you only pay the minimum amount due.