If you’re even asking whether you should join finances, it’s fair to say that you’re seriously committed to someone. We trust our significant others with our families, our friends, and even our embarrassing stories. It’s only natural that finances fit in there somehow.
However, sharing finances can be a big risk; sharing credit cards, even more so. It’s no secret that credit card debt can grow rapidly out of the control and have long-term repercussions. You trust your partner, of course, but you should know exactly what you’re trusting them with before moving forward with a joint account.
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What is a Joint Account?
With credit cards, a joint account is an account shared by two people who are equally responsible for paying it off. When the bill comes, you are both held responsible for paying the balance. This differs from simply having an additional card holder, which ultimately only holds one person accountable for paying the bill (even though both card holders are able to charge transactions to the same credit card account). Both of these arrangements allow a little more ease in purchasing items from the same account. If you are in a serious commitment and pooling your money anyway, then having a joint account can be tempting. However, it’s natural to wonder what the risks of a joint account are, and weigh them against the benefits.
The Risks of Joint Credit Card Accounts
While a joint account can make it easier to share money, it does come with certain risks. First of all, you are obviously held accountable for your partner’s financial choices. So if your partner misuses the credit card, you are just as responsible as them for paying off this balance. What’s more, even if you did not authorize the purchase, certain states allow for debt collectors to pursue you as well. So if your partner makes a terrible financial decision, you’re both on the hook to pay it back.
But the trouble doesn’t end there. Because both of your names are tied to the account, both of your credit scores could take a hit as well. A lot of people think that your credit scores are already joined when you get married, but that’s actually not true. It’s just that many couples open a joint credit card or bank account together, and activity from those accounts will show up on both of their credit scores. This means that as a result of your partner’s poor judgement, you might end up being hounded for a purchase that you didn’t make, and your credit score will suffer as well.
Also, consider that this relationship might not last forever. Of course, every couple thinks that they will go the distance, but consider that if you do break up, you’ll likely have to close the account. Doing so can damage your credit score as well, since it is partially determined by the age of your accounts. While this might be the least of your problems if it comes to a separation, it is still something that you should consider.
Earning Rewards and Other Joint Benefits
On the plus side, having a joint account can be more beneficial than just making it easier to pool your money. Two people charging purchases and bills to the same credit card can mean earning and accumulating rewards faster. If you and your significant other become joint users on a credit card with travel points, cash back, or other rewards, then coordinating your spending can end up reaping you paid vacations and other rewards faster than if each of you was spending independently. In a sense, the reward for a joint account could be a free couple’s vacation.
Furthermore, if you and your partner take advantage of having a joint account, you can better plan out your spending habits. Instead of creating a budget from two different accounts, you’ll only have to consider your joint accounts. This can really simplify budgeting, especially since each of you will know that the other will see the statement.
Joint accounts can also raise credit scores if one of you is struggling. Of course, you don’t want to overlook your partner’s financial history, but if you do trust them enough to share an account with them, continued financial responsibility can benefit both of your credit scores.
What To Do Before Signing Up for a Joint Account
The secret to managing a joint credit card account is a lot like the secret to a good relationship: communication. The more you talk to one another about spending habits, credit scores, budgeting, and how you use your credit cards, the more likely you will be to enjoy all the rewards of joint accounts while actively managing the risks responsibly.
There are a few ground rules you should at least talk about before you make the decision to become joint users on a shared credit card account:
- Who Will Pay the Bill? Save yourself frustration, panic, and arguments by determining how the credit card bill will be paid each month. You could take turns, you could use a joint banking account, or you could have one person assume responsibility. Whatever you decide, just make sure it is clear before you start charging to the card.
- What’s Your Spending Limit? It is easy, and possibly tempting, to simply treat the credit limit on the account as the ceiling for spending. Generally, this is not a great idea, and can easily lead to carrying a balance and paying obscene interest and fees. Talk to each other, agree on a limit that keeps your credit utilization lower, and then communicate about charges that might put you over that limit.
- Requiring Approval for Large Purchases. It is possible to put limits on how much can be charged to your credit card in one transaction. You can use this to avoid surprises, and force the two of you to agree before making any major purchases.
- Keep Communicating About Spending. Ideally, your relationship will last, and you’ll keep using your join credit card for a long time. Making both work depends on openness, and regularly touching base on how you use the card, how your spending matches up with your budget, and how you plan to pay the bill every month.
This is ultimately a decision that you two will have to make together. Plenty of couples have joint accounts, just like many have completely separate ones. You’ll have to weigh the pros and cons. Like many of life’s decisions, the answer isn’t laid out for you. However, as long as you can both approach the situation with a level head and consider what will best suit you in the long run, then you’ll be prepared to deal with whatever challenge life throws your way.
Looking for more tips and guides on how to use credit cards? Head over to our credit card resource center. Want more information on what goes into a credit score? Visit our credit score learning center.
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