Credit Card Pros and Cons
A joint credit card account lets you be a joint owner of a credit account with another individual, like a partner, friend or family member. However, sharing a joint credit card accounts is very different from adding somebody to your account as an authorized user. When you add somebody as an authorized user on your joint credit card account, that person will have access to all of your available credit cards. If they use up all the available credit on your joint credit card, they will face the same penalties as if they had used all of your credit cards.
If you are concerned that one of your cardholders may use their credit cards improperly, you may want them to limit their access to just one cardholder credit account. This can help both you and your other cardholders protect their credit scores. In fact, many companies will provide credit monitoring services to help cardholders maintain a good credit rating. Credit monitoring can also help you manage your joint credit card accounts.
When you are applying for joint credit card accounts, be sure to let each other know about your plans. For example, when you apply for the account, you should let your other co-applicant know if you will only allow them to make purchases after you have used all of your available credit. Some companies may require you to pay an annual fee. This annual fee can sometimes be separate from the cost of the joint card. Therefore, you and your other co-applicant will need to agree on the annual fee before you sign on the agreement. The terms and conditions of the annual fee may include an ability to earn air miles, redeemable credit points or a cash back incentive.
It is always a good idea to read all of the terms and conditions of joint accounts carefully. There are often many restrictions that could apply to your spending. For example, when you are applying for credit with your other credit cards, you should ensure that you only apply for the minimum monthly payment required. Be careful not to exceed this minimum payment as you may find that you cannot apply for new credit if you have exceeded your monthly payment limit. As well, be careful to avoid applying for more credit than you actually need so that you do not damage your credit score and your ability to enjoy other benefits offered by joint credit card accounts.
If you do decide to allow another person to have access to all of your existing credit cards, make sure you know exactly how much of your available credit each person has. You should also keep in mind that if someone else gets access to your existing credit card account, they will be responsible for making any purchases you have not made. You may not be able to take advantage of special offers or low interest rates available to people who already have credit on their existing credit cards.
It is important to remember that even though you are both authorized users of the credit account, your joint credit cards can only be used for existing credit purchases. This means that you cannot use them to make purchases for items that are not already owned. Therefore, it may be in your best interest to keep other financial products such as loans separate from your joint accounts to keep your finances separate. Also, when you use one or both credit cards to make purchases, the company will report the transaction to the credit reporting agencies. The reporting companies will let you know whether the item was purchased and if you paid for it or not.
Of course, there are some pros and cons to both these types of accounts. On the positive side, when you have someone else make payments on your joint credit cards, there is a bit of credit protection for the owner of the account. You will be the first line of defense if your spouse becomes unemployed or has his/her salary cut. In addition, this type of security could give you peace of mind that you do not have to worry about your spouse getting his/her hands on all of the money that you make.
However, on the negative side, the primary disadvantage is that you have to pay for the privilege of being an authorized user of the joint account. If you are the primary cardholder, this means that you will have to cover the costs of whatever purchases you make with your card. It may even be more expensive than purchasing the items yourself, since you will be paying for the added protection that the company provides. Both parties to the joint account will then pay the bill, leaving no room for any deductions.