There are two ways two people can share a credit card account. First, you can add the second person as an authorized user on the credit card. As an authorized user, the other person isn’t legally responsible for making payments on the credit card, but is able to make charges to the account. The second way is to add the person as a joint account holder. In this case, the second account holder is just as liable for making credit card payments as you are.
You might get a joint credit card account with a spouse, partner, or even a child to simplify bill paying, to merge your lives, or to help that person get a better credit score. Managing a joint credit card account isn’t always easy. You have to discuss everything you’d automatically decide when you have your own credit account.
Set a maximum balance. You might decide your credit limit is the max spending limit. Considering that maxing out your credit card isn’t good for your credit score, it’s better to choose a lower amount. Ideally, you should never carry a balance that’s more than 30% of your credit limit. That’s $300 on a credit card with a $1,000 limit. Setting maximum balance protects both you and the other account holder’s credit scores and keeps the balance at a manageable level.
Set an “approval” limit for large purchases. Figure out a large purchase limit that you’ll use as a guideline for discussing the purchase before making it. That way, there are no surprises when you come home with an expensive purchase, when your partner gets ready to make her own purchases, or, even worse when the bill comes. If you want to make purchases at or near the limit, discuss it with your partner first. For example, you might decide that you both have to agree on any purchases over $200.
Let the other person know you made a purchase. You don't have to start reporting everything you do to your spouse or partner, if you don't already. It's a good idea to share that information so the other account holder knows there's a difference in the credit card balance when she (or he) goes to use it or when the bill comes.
Check the balance before charging. Don’t take for granted that the account balance is the same as it was the last time you checked it. You never know when the other account holder will use the card. A quick call to your credit card’s customer service department can keep you from going over your agreed spending limit or worse, your credit limit.
Decide who’s going to pay the bill. If the two of you pay the bills together at one time out of a single account, deciding when the bill will be paid is easier. If that’s not how bill handling works in your home, you need to decide upfront which one of you is going to pay the bill. If one person’s going to pay the bill, will the other put in some funds too?
Understand your partner’s spending habits. If you’re a big spender and your partner is a tightwad, you both need to understand how that will affect sharing a credit card. You might want to splurge with the credit card, while your partner disapproves. That’s where spending limits and communicating before large purchases come into play. Knowing how your partner spends will bring fewer surprises.
Realize the card affects both your credit. Whether you have a joint account or an account with an authorized user, both parties’ credit is affected by both partner’s credit habits. Financially speaking, you should think twice about adding someone with bad credit to your account. History shows that person can’t responsibly handle credit. Be prepared to take responsibility for your partner’s irresponsible spending habits because that’s what sharing a credit card is about.
Know the ramifications of a split. Unfortunately, not all relationships last forever. If you break up with your joint account holder, both of you are still responsible for paying the credit card bill. Not even a divorce decree changes the terms of the original contract. If the judge says each of you pays half the bill and your ex doesn’t keep up his (or her) end of the deal, the credit card issuer doesn’t care – you’re both still held liable for making payments. You should also be wary of revenge spending – when an angry ex runs up the credit card bill and doesn’t bother to repay it. The credit card issuer may not let you close the joint credit card account until the balance has been repaid, so the other account holder could keep charging while you work to pay off the balance.
Managing a joint credit card is easier when both account holders have similar spending habits and financial goals. When there’s a big difference between your spending habits – like a thrifty spender with a more liberal spender – it could cause problems. Communication is the key to making sure using a joint credit card doesn’t hurt both your credit or your relationship. It’s best to make decisions about using the credit card before you ever get the card. Put them in writing so it’s easy to refer back to them whenever there’s a question or doubt about the agreement.