How to manage shared accounts

By Marianne Curphey

sharing-credit-card

If you're married or cohabiting, you might have a joint mortgage, joint bank account and joint savings. However, the rules are different when it comes to credit cards. Unlike in some other countries, such as the US, there's no such thing as a joint credit card in the UK.

However, there are ways you and your partner can share a credit card account. But before you enter this kind of card arrangement, or open a joint bank or mortgage account, both parties should be clear on who's responsible for the repayments.

How to share a credit card
UK credit cards are held in one name only, says John Webb, consumer affairs executive at credit reference agency Experian. But you can add a secondary cardholder, also known as an authorised user.

"What you can do is take out a credit card and then add an additional cardholder to your account," he says. "They can benefit from being able to spend on it, but the responsibility for the card account and paying the bills rests with the original person who made the application and who is the main cardholder."

The secondary cardholder will get a card and have all the same spending capabilities as the main cardholder - with none of the repayment liability. You should, of course, come to a repayment agreement with a potential authorised user before you add one, because if that person racks up a tonne of debt and runs off, you are the one liable for the card debt.

If the relationship has broken down, you can cancel the authorised user's card. You are responsible for the charges, but your ex won't be able to keep charging on the card.

If an ex-partner is trying to take out a card in your name, however, that would be a clear case of attempted fraud, Webb says.

If your authorised user simply spends more than you would like, you can put a limit on the secondary card. You may be able to change the limit if you contact your individual lender and explain the situation, Webb says.

How joint bank accounts differ from shared credit cards A 2017 survey commissioned by Sarah Pennells, founder of the money advice site Savvy Woman, suggests that many people don't understand joint bank accounts.

Most people (74%) don't know that either person is liable for paying the entire debt on a shared account.

Almost half (46%) of those questioned thought - wrongly - that if they split up with a partner and there is a debt on their shared account, each person was liable to pay only half the debt. Some (11.9%) thought that only the person who runs up the debt is responsible for paying it - which is also wrong.

"I get a regular stream of women contacting me after their relationships have broken down and they find themselves liable for their partner's debts," Pennells says.

The reason for uncertainty may be that, according to experts, the liability varies based on what sort of contract (credit card, checking/savings or mortgage) you have signed. And it's not always easy to find the answer in your card agreement.

"Banks' terms and conditions can run to many pages, so perhaps it's not surprising that many people don't read them," she says. The study found that nearly nine out of 10 people (87.5%) want banks to provide clearer information when they open a joint account, and nearly half (43.4%) want a one-page summary.

Pennells says she was surprised that so many people didn't understand the importance of the terms and conditions of joint bank accounts.

"It's important to know what your liability is when you sign a contract," she says. "You could end up being asked by your bank to pay off an ex-partner's debt if it has been run up on a joint account. The bank is within their right to go after anyone whose name is on the account."

The bank won't allow you to close a joint account until all outstanding debts are cleared. However, you can ask the bank to change the terms of the operation of the account so that both account holders must agree to future spending.

If you have a joint mortgage, the same rules apply - both parties will be wholly responsible for repayments.

For example, because the mortgage is shared, if one person stops paying his or her share of the mortgage, the other person will have to find the extra money, or the property will be at risk of repossession.

How your financial links affect your credit Webb says there are many misconceptions about financial links and credit reports. The Savvy Woman survey also found that people are unsure about whether their credit rating can be affected by their partner's debt.

"If you are the main cardholder on a credit card account and you add another cardholder to your account, that does not create a financial association," he says. "There are only really two ways that you can be linked financially: either by opening a joint bank account, or making a joint application for credit (for example, a loan or mortgage)."

You don't create a link on your credit report simply by living with or marrying someone, either, he says.

How to get a credit divorce If you have a financial link (or financial association) with someone, potential lenders have the right to look at the other person with whom you have a financial association when you apply for credit.

"The lender can look at their credit report, too," Webb says. "That could affect a decision on whether to approve your application for credit."

A financial link "will stay on your credit report until and unless you contact the credit reference agency to let them know otherwise," he says.

However, you can get a "credit divorce".

"If you want to create a financial disassociation, then you should contact all three credit reference agencies (Experian, Equifax and Callcredit) and let them know that your circumstances have changed," he says.

See related: Who can I add as an authorised user?, Choosing the right card as your family grows, Section 75 and third parties: when you aren't protected

Updated: 6 November 2017