Is Sharing a Credit Card a Good Idea?
By Eva Norlyk Smith, Ph.D.
September 25, 2009
Many people opt to share a credit card account, either by adding a second person as an authorized user or as a joint account holder on the credit card. In each case, the other person gets their own credit card to use, the only difference is that authorized users are not liable for outstanding credit card balances, whereas for joint account holders, both cardholders are held equally responsible for any outstanding credit card debt.
There are many good reasons to share a credit card, and they all boil to the same thing: it can greatly simplify one’s finances. A married couple may want to join all of their accounts, including their credit card accounts. Parents may want to add a child to their credit card account, so their kid will have access to a credit card when going on a trip or for emergencies. Business owners often add one or more of their employees to their credit card account, so they can make purchases for the business.
In short, sharing a credit card can be very convenient for both parties involved. But is it really a good idea? There are some significant pros and cons to sharing a credit card, and if you’re considering sharing a credit card, you need to be aware of both.
The Pros of Sharing a Credit Card
For couples, sharing a credit card account makes it easier to keep track of your monthly expenses and pay monthly bills. Likewise, parents who opt to make their child an authorized user on their credit card might find it an easy way to monitor their child’s spending habits and teach him orher basic financial literacy skills.
In the case of joint account holders, another advantage of sharing a credit card is that it can help one of the account holders to establish and build credit. For joint account holders, the credit card shows up on both cardholders’ credit reports, which means that the good credit of one cardholder also becomes the good credit of the other cardholder. In financial terms, this is often referred to as piggybacking.
The Cons of Sharing a Credit Card
While sharing a credit card can greatly simplify your accounting, it creates some complications of its own. With a shared credit card account, you will need to more carefully coordinate expenditures to make sure the account doesn’t get maxed out. You will also need to make sure that your credit card partner has similar spending habits. If he or she is a big spender and you are the frugal type, sharing a credit card will likely not be such a great idea.
Worse, should something happen to the relationship, you could find yourself liable for charges you’ve never made. Credit card companies don’t care whether or not you’re divorced and the divorce decree calls for your spouse to pay off the credit card debt. If your name is on the account, the debt will remain yours as well until it’s paid off.
If you do want to share a credit card, here are some tips to help make it work.
- Keep open communication. Make sure that each cardholder is aware of the other’s purchases. Keep physical records of your charges in one central place, or download your charges into a bookkeeping software every few days, so you’re always on top of what has been spent on the account.
- Set clear goals. Set clear goals for your spending patterns, including spending limits for each cardholder in different purchase areas, so that there is clear agreement on what the credit card is used for and what not.
- Agree on who is responsible for the bill. For joint credit card accounts, both of your credit scores are affected by how well the account is managed, so make sure you decide who is responsible for paying the bill each month and make sure that the bill is always paid on time.