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If you are asking yourself what is a joint credit card account, you need to consider several things. We’ll look into what this type of credit card account entails, and discuss some of the benefits and risks so you can decide if involving yourself in one is right for you.
What is a Joint Credit Card Account?
When it comes to joint credit card accounts, there are three primary options.
- Authorized User: Someone who is allowed to use another person’s credit card account without any responsibility for paying the bill is an authorized user. Just like the primary cardholder, the authorized user gets a physical credit card with his or her name imprinted on the front. Although the primary account holder is responsible for the account, including payments, late charges, and so on, the activity of the account affects the credit history of both parties.
- Cosigner: In theory, a cosigner is someone who steps up to help another person get credit. In reality, this person is an equal borrower. That means when it comes to paying the balance due on the credit card, the cosigner is just as legally responsible as the primary account holder is. Again, the spending and bill paying activity on the account shows on the credit report of both parties.
- Joint Account Holder: In its true sense, a joint account holder usually applies more to a bank account than a credit card account. However, in the case of a credit card, this means there are two account holders, each with equal responsibility and of equal status. The account activity has the potential to affect both parties’ credit history.
Benefits of a Joint Credit Card Account
Any joint credit card account comes with certain risks. However, there are also several benefits worth noting. For one thing, this allows you to help another person. Especially for someone trying to build good credit or rebuild credit, having a responsible joint account holder is highly advantageous. With improved credit, the person has more buying power. That means in exchange for good credit, a person will get a lower interest rate on loans, better insurance premiums, have an easier time finding a great job, and more.
Another positive aspect of a joint credit card account is that monitoring purchases and payments are relatively easy. Although there are two cards involved, just one person oversees the account. That eliminates confusion, frustration, and mistakes that come from too many people managing the same account.
Risks of a Joint Credit Card Account
Although some of the risks of a joint credit card account were touched on, it is important to look at this closer. In the case of an authorized user, the primary account holder has little control over spending. Even if the account holder advises the authorized user not to go over a certain dollar amount or to use the card only in emergencies, there is little immediate control. That means the primary account holder is left cleaning up the mess and repairing any damage done while the authorized user gets off without any real repercussions.
For all of the different types of joint credit account holders, something could happen that puts a strain on the relationship. All three types of joint account holders are usually close to the primary account holder, including old friends and family members. For that reason, it is important to be careful about who you share your account with. There are even cases in which couples have separated or divorced over a joint credit card account.
Finally, damaging your credit score is a serious risk. Unless both parties are responsible and honest in using the card, even a small mistake or oversight could have a significant impact on a person’s credit score. Depending on the severity of the damage, it could take years to fix.
If you are contemplating adding someone to your credit card account, be careful. Most financial experts will tell you that it is better to maintain two separate accounts as opposed to sharing one. Before making the decision to do this, evaluate your reasons and determine if the benefits outweigh the risks. This is not a decision to make lightly.
Author: Jeff Gitlen
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