Relationships & Finances: The Pros and Cons of Joint Credit Cards

Calling all lovebirds — when’s the last time you chatted about your latest purchases? Indeed, open communication is a pillar of any relationship, and money is an important topic. It might feel awkward to talk about debt, financial goals, and credit cards; however, it’s vital for financial wellness and mental health. 

Here at Credit Canada, we support many of our clients through tough conversations with their partners about debt. We know it’s intimidating. Still, laying everything out on the table will help you address your issues and feel more connected. 

But money and debt are broad topics. Let’s focus on one subtopic for now: joint credit cards. We’ll walk through the difference between authorized users and co-borrowers, how joint credit cards impact credit, what happens in a breakup, and more.

Authorized users vs. co-borrowers

Do you remember your first credit card? Maybe you were an authorized user on your mum’s Visa as a teenager (lucky you). This meant you could make purchases with the card as you saw fit. 

But what happens if you spend $1,000 on the latest Xbox games or endless movie tickets? Honestly, not much. 

Your mum was still the primary cardholder, aka the owner of the credit account. You probably got grounded; however, you weren’t legally on the hook for the money, and your credit report was left unblemished. 

Now, it’s a whole different story if you’re a co-applicant. You might be more familiar with the term “co-signer,” but that’s usually for other loans, especially mortgages. Co-applicant is the term used for a joint credit card account. 

If you apply for a joint credit card with your spouse or partner, you’re both co-applicants. Meaning? You’re equally responsible for the money owed. Late payments hurt both of your credit scores, but similarly, on-time payments improve both of your credit scores.

So, here’s a quick recap: 

• Primary cardholder: You’re the only name on the credit card agreement, meaning you’re responsible for all payments. You can add or remove authorized users as you see fit, and your credit card activity can affect your credit score and history.
  
  
• Authorized user: You’re authorized to use the primary cardholder’s credit card, but ultimately, you’re not responsible for making payments. You won’t build or hurt your credit with this account, either.
  
  
• Co-applicant: Your name is on the credit card account with someone else. Both of you are responsible for payments, and the account activity can affect both of your credit histories. 

Pros and Cons of Joint Credit Cards

First off, assess your relationship. 

Do you trust this person completely? 

Are you aware of their spending habits? 
If not, think twice before applying for credit cards. 

The same goes for all the commitment-phobes out there — applying for a joint credit card is the last thing you should do. 

Now, married and serious couples join credit cards all the time. Still, the move poses pros and cons you should consider before tying that knot. 

Pros of Joint Credit Cards

As long as you trust your partner’s spending habits, applying for a joint credit card is a financially savvy move.

1. Builds credit: Is your partner new to Canada? If so, they might have trouble establishing enough credit history to borrow personal or mortgage loans. So, a joint credit card could help them build credit and further other financial goals.
2. Higher credit limit approval: Let’s say you want a $5,000 credit limit, but the credit card company only approves you for $3,000. If you join forces with your partner, chances are you’ll be eligible for a higher credit amount. That is if your partner has a solid credit score and history. Still, make sure you keep an eye on your credit utilization ratio since two people spending could jack it up high enough to affect your credit score.
3. Shared costs: Of course, this benefit depends on your combined spending habits. But generally, joint credit cards allow a little breathing room since two people can support the payments.
4. More reward points: That trip to Cabo just became more attainable! A joint credit card means more spending, which means more reward points on your travel credit card. 

Cons of Joint Credit Cards

Overall, joint credit cards only pose cons to couples with infrequent and non-transparent financial conversations.

1. Shared responsibility could hurt your credit: Let’s say your partner made a few big purchases but didn’t make a payment on time. On top of that, you’re equally responsible for repayment, even if you didn’t spend a penny! Unfortunately, all late payments will still hurt your credit. Still, this is only a con if you don’t openly communicate and strategize your spending and repayment.
2. Disagreements about spending: Some couples experience a rude awakening once they’re financially responsible for their partner’s spending habits. You might disagree about monthly spending amounts once you join credit cards. However, open communication should mitigate this con.
3. Breakups don’t void credit card agreements: If both your names are on a credit account, that responsibility persists even after a breakup. You can make arrangements to remove the shared responsibility, but it takes time. In a worst-case scenario, one partner could rack up credit card debt on the shared card as revenge. This can happen if anyone is particularly vengeful. 

Speaking of breakups…

What Happens if You Break Up?

Debt after divorce is tricky enough. But even outside of marriage, joint credit cards pose some obstacles. If you’re a primary cardholder with your partner as an authorized user, it’s easy enough to remove them. All you have to do is call your credit card company. But if you’re both listed on the credit account agreement, things get a bit tricky. 

First off, you both need to settle and repay any existing balance on the card. Then, both of you must agree to close the credit account — an action that can actually affect your credit, though not dramatically. 

Another option is to transfer the debt to one of your personal credit cards. 

Keep in mind that both co-applicants must take action to close or transfer the account balance. You could be feeling emotionally drained and wanting nothing more than to sever ties with your ex. Still, your credit card agreement won’t follow suit until you go through the necessary channels. 

Alternatives to Joint Credit Cards

Don’t feel ready to join credit cards? You don’t have to! Consider a few alternatives that might make more sense for your relationship:

• Authorized user: This is a great option for a primary cardholder who wants to help their partner build credit. If you’re unhappy with their spending habits, their removal is only a phone call away.
  
  
• Guarantor: Maybe you need help scoring approval for a credit card. Some credit card companies allow guarantors, where your partner can support your application without having to take responsibility for the payments.
  
  
• Keep things separate: Ultimately, finances look differently in every relationship. If you don’t feel like joint credit cards or anything similar is in the cards, that’s okay too. 

Get Free Credit Counselling with Credit Canada

Bottom line? Joint credit cards might support your financial goals, but only if you and your partner keep an open line of communication and generally have similar values surrounding your finances. 

Still have questions about joint credit cards? Talk to one of our certified credit counsellors today. 

And if you’re curious about better credit card habits, tune into Credit Canada CEO Bruce Sellery's Moolala: Money Made Simple podcast episode: