When two people join together in marriage they are typically also creating a financial merger. As they pursue their life’s goals, they combine their incomes and jointly save their money. Therefore, it is perfectly natural to assume they will stand united in their use of credit cards. For many couples, opening a joint credit card account is their way of validating their merger, but it is not always the best credit card strategy for maintaining financial harmony.
Determining the Best Credit Card Strategy for a Couple
There are three approaches couples can take in a credit card strategy – open a joint credit card account; keep separate credit card accounts and add the spouse as an authorized user; or keep separate credit card accounts. The right approach for any particular couple depends on a number of factors, which should be carefully considered because they could lead to some marital strife down the road.
Joint Credit Card Account
Anyone can open a joint credit card account with another person. Many married couples do so as a way to simplify their budgeting and bookkeeping. The key factor to consider is the creditworthiness of each of the spouses. With a joint credit card account, the credit scores and history of both spouses are used to determine the interest rate and terms of the card.
If one spouse has excellent credit and the other has fair credit, they will not be able to qualify for the best rates. Both spouses share equally in the responsibility for making timely payments and both will reap the benefits of those timely payments on their credit score. Conversely, if one spouse forgets to make a payment, the credit scores of both spouses will suffer.
The problems can come when a couple separates or divorces because both people can still use the card and both are still responsible for keeping payments current. It’s not as simple as calling the customer service number to cancel a joint credit card. For this reason, an increasing number of credit card issuers are no longer issuing joint credit cards, including American Express, Chase, Capital One, and HSBC.
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The better option may be to maintain separate credit card accounts and simply add the spouse as an authorized user. This can be especially beneficial when one spouse has better credit than the other because both spouses can benefit from a more favorable interest rate. The authorized user can use the card freely, but the primary account holder has the sole responsibility for making on time payments. The primary cardholder has complete control over changes to the account, reporting lost or stolen cards, and redeeming rewards.
This arrangement can also help the spouse with less than great credit because some credit card issuers do report the activities of authorized users to the credit bureaus. If that is an important consideration in choosing a credit card, be sure to check if a credit card issuer does report authorized user activity. Barclays, Bank of America, Chase, American Express, Capital One, and Wells Fargo are among the issuers that report authorized user activities to the credit bureaus.
Separate Credit Card Accounts
A third approach is for couples to maintain separate credit card accounts. This is a better strategy for spouses that have different spending habits or choose to manage their finances separately. This is fairly common for couples entering their second marriage or in cases where both spouses contribute equal financial heft to the family’s finances.
Picking the Right Credit Card
In many households, you will find some combination of these three approaches. Again, it depends on individual and family circumstances and each person’s attitude about money. The key is to have a financial strategy that pertains to credit cards and their use. The strategy should also include picking a credit card that can generate the most benefits for the family as a whole.
For example, if one spouse travels extensively, he or she should choose a card that offers generous travel rewards and add the other spouse as an authorized user. The other spouse could obtain a card that rewards them for their daily spending with cash back rewards. Couples that spend more in certain spending categories, such as groceries and gas, would benefit from choosing a credit card with a generous rewards program for those spending categories.
Making a Credit Card Strategy Work
The most important element of any credit card strategy for couples is to maintain an open dialogue about their use of credit. Marriage is indeed a financial merger, which does create a potential upside. But it can also become a breeding ground for problems when couples don’t share the same goals, values, and attitudes about money and debt.
As with any successful business, the financial success of a married couple hinges upon a shared vision and adherence to basic financial principles. That requires constant communication on priorities and the family budget. Regardless of who holds the strings to the credit card accounts, both spouses are impacted, which entitles both to equal say in financial matters.
Author: Jeff Gitlen
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