Is a Joint Credit Card Account a Good Idea? Why or Why Not?
Joint credit card accounts have been around for a while, but not many people know about them. Joint credit card accounts allow two people to have an equal status with the account. This means both can buy things, dispute errors, request a higher credit line, and both are responsible for the bill. This article will cover the difference between joint account holders, authorized users, and co-signers. The banks that still offer joint accounts, and a pro and con list of having one.
What’s the Difference Between an Authorized User, Joint Account Holder, and Co-Signers?
You can either open a new account with two people’s names or add someone to an existing account. This will make the account a joint account. There are three different statuses people can have on joint accounts, and they are listed below.
- Authorized User. An authorized user gets added onto someone’s existing credit card. They may get a card with their name on it, but it’s the same line of credit. These users are not required by law to pay for anything they purchase on this account. This fact makes it a risk to the primary account holder. Depending on the state, an authorized user may be able to get ATM cash advances as well. They may not redeem any rewards or make changes to the account. This also means they can’t request a higher credit line. The authorized user’s credit history isn’t usually taken into consideration either.
- Co-Signer. This is the least common option available. A person with poor credit might ask a person with good credit to co-sign on a credit card for them. This means that the individual who co-signs is effectively letting the person with bad credit have the same credit line they do. Also, if the person you co-signed for doesn’t pay the bill, it falls on you to pay it. It’s easy to see why this could be a problem.
- Joint Account Holders. Joint credit card accounts is a process where two people’s credit considered when opening the account and credit limit. Both account holders can buy things, dispute charges, have access to rewards, etc. However, they are also both responsible for paying the bill. This is the main difference between a joint account holder and the other two options.
Graph: The Differences Between Authorized Users, Co-Signers, and Joint Account Holders
|Authorized User||Co-Signer||Joint Account Holder|
|Appearance on the Credit Report||Yes but it Varies by the Card issuer||Yes to 1 Credit Bureau for Sure, Maybe Not all Three||Yes to 1 Credit Bureau for Sure, Maybe Not all Three|
|Charge Purchases to Account||Yes||No||Yes|
|Responsible for Paying the Bill||No||Yes||Yes|
What are the Pros and Cons of a Joint Credit Card Account?
There are several pros and cons to having a joint credit card account. This section will list several of each to help you decide if this is a good fit for you.
Pros of Joint Credit Card Accounts
- Access to Better Credit for One Person. One person will have a lower credit score than the other. Joint accounts are a way for someone with poor credit to get a higher credit line. The joint accounts go by both customer’s credit history, and this gives one a boost.
- Better Account Management. If two people are on the same account, you have two people monitoring it. This increases the chance of catching and resolving issues quickly.
- Better Credit Score. The credit use gets reported to the credit bureaus. Thus, with responsible credit card use, this can move a person’s credit rating up a few points.
- Better Interest Rate for One Person. If a person with poor credit applies with someone with good credit, the interest rate will be lower. Also, this will help with the amount they’re paying over time. This will only work if the bill is paid on time, every time.
- Share a Bill. Sharing a bill will help lower the number of bills you owe between you and your spouse. Furthermore, it can help you get out of debt faster with both parties paying on it.
Cons of Joint Credit Card Accounts
- Added Debt. If two people are on a joint credit card account and one dies, the debt becomes the surviving person’s problem. They will be responsible for paying it back or letting it hurt their credit rating if they don’t do it. So, if they had separate accounts, this debt would have been written off at the time of death.
- Can Lower a Credit Score. The person who has the better credit score has the risk of their score dropping. This can happen because the other person doesn’t make on-time payments, or doesn’t pay at all.
- Financial Responsibility. If you allow someone onto your credit line, you have the responsibility to pay the bill. Thus, it doesn’t matter if you bought things or not. This puts a huge risk on the person who’s letting an authorized user or co-signer onto their credit line.
- Relationship Issues. Joint credit card accounts have the potential to add a lot of stress to a relationship. In addition, people have reported breaking up over disagreements on how the account should be used.
What Banks Currently Offer Joint Credit Card Accounts and are They Popular Today?
Many banks are doing away with this practice as it has fallen out of favor with the general public. Also, joint credit card accounts are seen as a very high-risk option. There are secured credit cards available. As of today, Bank of America, Discover, U.S. Bank, and Wells Fargo are the only banks that offer this account. Furthermore, people who want to open joint credit card accounts are typically advised against it. There is simply too much risk involved, with a little payoff.
In conclusion, this article has gone over the difference between the three different account holders. We talked about pros and cons of having joint credit card accounts. Lastly, we finished by touching on which banks offer them and if you should consider one.