While many millennials are opting out of marriage — at least for now — they are cohabitating with their significant others in increasing numbers. Some of these couples may choose to merge their financial lives. This might include opening a joint credit card. But is opening a joint credit card with a domestic partner a smart idea?
What’s a joint credit card?
A joint credit card is a credit account owned by two people who have equal rights and responsibilities for the account. Both parties can use the credit account and make changes to it, and both have a responsibility to pay for charges. If no one pays, both credit scores will suffer. (Note: Joint account holders and authorized users aren’t the same thing — we’ll get to that later.)
When is the right time to open a joint credit card with your domestic partner?
We recommend you don’t open a joint credit card. As a rule, we caution against joint credit cards for anyone, including spouses. There’s a better option — but first, here’s why opening a joint credit card is not a good idea.
If your S.O. doesn’t pay, you have to, regardless of who spent the money. Opposites attract, so while you may be a Frugal Francine, your significant other may be a Spendy Sam. If your joint account holder chooses to max out the card and doesn’t make payments, you will be stuck with the bill. You could refuse to pay on principle, but your issuer doesn’t care who spent the cash, and not making on time payments is the easiest way to trash your credit.
You may break up. Whether you’re married or living together, there’s always the risk that things won’t work out. We hope this isn’t the case, but statistically, it could happen. If you break up, one of you needs to pay the bill and you likely won’t be able to close the credit account until the balance is paid in full. If your partner happens to be vindictive, he could continue to make charges to the account and not pay them, knowing that you will cover the bill to avoid ruining your credit score.
Bankruptcy can affect you both. If your partner chooses to file bankruptcy for whatever reason, your joint credit account will be included in the proceedings. For information on what to do if this happens, check out our article on what happens if your joint account holder goes bankrupt.
Now, if you’ve been suitably scared away from opening a joint credit card account, here’s a solution if you want to share accounts with your partner.
The better option: Authorized users
Credit card accounts are generally best kept separate. However, if you really want to have the same credit account, consider adding each other as authorized users, instead. An authorized user is someone with permission to use a credit account who can’t make changes to the account and isn’t required to make payments.
Although you’ll still have to cover any charges your significant other makes, you have the right to drop him as an authorized user and don’t have to worry about your partner making any account changes — such as increasing the credit limit or using your rewards.
Authorized usership is also a great option for those with a partner with low credit or no credit. Your significant other will enjoy the credit boost of your timely payments and you’ll be able to help him raise his credit score without incurring much liability. Just make sure you trust your partner to keep spending reasonable. If he exceeds your agreed-upon spending limits, you might consider keeping accounts totally separate.
Bottom line: Joint credit cards are generally not advisable, whether your relationship is “legal” or not. If you want to share a credit account with your partner, consider adding him as an authorized user. Otherwise, keep credit accounts separate. If you both feel the need to keep finances transparent, share and discuss your respective credit card statements each month.
Couple with a credit card image via Shutterstock