The pros and cons of sharing credit cards


 Sharing a credit card with a loved one or family member can often seem like a logical thing to do, particularly if you also split other responsibilities like household bills. But sharing a credit card can also lead to problems later on.

Before deciding whether to share a credit card with someone, it's important to understand that you have several options.

Option No. 1: Add someone as an authorised user.
An authorised credit card user is someone who can use the credit account, but they don't have any responsibility for paying the bill. Many credit card holders add authorised users to their accounts, whether they are sending a child off to university, or setting up joint finances with a loved one.sharing-card

There are some advantages to adding an authorised user to your account. For one thing, your child or loved one can use the card legally should they ever require the additional funds. For another, you can pass your good credit standing on to an authorised user. This means that a loved one with poor credit or no credit history can "piggyback" on your good score and improve his or her reputation with the credit reference agencies.

However, it is important to remember that, no matter how much you trust the authorised user, mixing money and relationships can be risky. It is absolutely essential to understand that adding someone as an authorised user means that person can rack up debts and not pay. The liability remains solely with you, the main account holder, and an authorised user's bad behaviour can damage your credit.

Consider drawing up an agreement with any potential authorised user. This contract should state who the authorised user is, how much he or she is allowed to spend and how much he or she is required to pay the credit card holder every month to resolve the debt. While this contract is not legally binding, it sets out expectations for card usage. If the terms of this "contract" are violated, you should strongly consider revoking the authorised user privilege. Some UK credit cards will also allow account holders to set spending limits for authorised users.

Option No. 2: Open a joint account.
Another option is to open a new credit card with someone -- in other words, open a joint credit card. A joint credit card account makes both parties equally liable for the credit card payments and affects both parties' credit reports. While adding an authorised user allows you to simply add someone to an account you already have, a joint credit card account requires the creation of a new account entirely.

As with adding an authorised user, opening a card with another person  can allow someone with good credit to help someone who might not be able to get a card alone. Yet both parties must know that they are equally responsible for the balance on the card. Even if it's just one person racking up debt with expensive purchases, both cardholders are liable. If one party decides not to pay the bill, that missed payment will ding both parties' credit reports.

 Another disadvantage to being a joint account holder is that, once you have signed, you may have considerable difficulty getting off the account, especially if there is an outstanding balance on the credit card. You could always request to close the account, which would prevent any additional debt being added to the account, but you and the co-signer would still be required to pay off the balance.

Option No. 3: Keep finances separate.
Opening a joint account and adding a loved one as an authorised user have their advantages. For parents, sharing a card is an opportunity to help their children build good credit and develop good financial habits. And helping a spouse or significant other improve his or her credit can help ensure a relationship is on firm financial ground.

But disagreements over credit cards and payments can cause arguments and tension within a relationship, with break ups and divorces causing even bigger problems. If a couple has gone through a divorce, a joint credit card could still be tying both parties together and could also be used maliciously. The best advice? Keep your credit card to yourself until there is a genuine reason to do otherwise.

 See related: Marriage and money: Should you keep them separate?; 5 common love and money mistakes

Published: 11 January 2012