What is a joint credit card and how does it work?

A joint credit card is a type of credit card that is issued to two people. Both cardholders get equal access to all the card features and benefits, and are equally responsible for paying off the debt. Joint credit cards are typically used by couples or close family members who share their finances.

Joint credit cards are similar to joint bank accounts, in that there’s one credit limit, with each partner enjoying equal access to the account via their own card, and each sharing equal responsibility for its use. As well as being charged fees and interest just the once, both partners will enjoy the benefits of a joint credit card, such as improving their individual credit ratings and sharing in any bonus points or rewards offered by the lender.

When a couple applies for a joint credit card, their two credit ratings will be averaged together – if you have a bad credit history, but your partner has a good credit rating, your lender will assess your joint application as if you both had an average credit rating. While this can be good news for someone with a poor credit score, allowing them to borrow more than they’d normally be eligible to access, it can be less ideal for the partner with the higher credit score, as they could theoretically have been individually approved to borrow more money.

You and your partner should only ever apply for a joint credit card together if you trust each other implicitly. Because both partners are equally responsible for any debts on a joint credit card, if one or both of you spend up big or default on your repayments, both of your credit ratings will take a hit.

There are several benefits and risks to consider when it comes to joint credit cards. 

Pros of a joint credit card

• Joint credit cards could prove useful for keeping track of shared expenses between partners.
• Depending on your individual credit scores, a joint credit card may offer a higher credit limit than either partner may be eligible for individually.
• A shared credit card could help you save some money while paying only one set of fees.
• Depending on the type of card you have, it may be possible to accumulate points and other rewards faster by using a single card for all your household and personal expenses. But don’t forget to keep an upper limit for your spending, lest you end up swiping your card for more than you can afford to repay.
• A joint credit card could also help yourepair your credit score(or your partner’s credit score) when you use the card responsibly and pay your bill in full each month.

Cons of a joint credit card

• Only a few Australian banks issue joint credit cards, which means you have limited options to choose from.
• When you apply for a joint credit card, both applicants are evaluated together by the card issuer. This means your credit card application could be declined despite an excellent credit score if your partner has a low score or history of financial default. Even if the application is approved, there’s always the risk that one partner could overspend on the card. This may lead to a large debt which could negatively impact both partners’ credit scores.
• A joint credit card could make it easier to combine resources and make purchases you can’t afford individually. However, it also increases your risk of taking on debt that’s not your own. If you and your partner have different spending habits, it may be difficult for either partner to shoulder the burden of the other’s expenses. Different attitudes towards money could even lead to resentment between partners, particularly when they’re sharing finances.

Because of the added complexity and risk involved with joint credit cards, not every lender makes this option available to borrowers.  As an alternative, they often allow the primary holder of a credit card to add an additional secondary cardholder to an account, or perhaps even more. Depending on the lender, adding additional cardholders to your credit account could be free, or you may need to pay a fee per extra cardholder.

In this arrangement, the primary cardholder carries ultimate responsibility for the credit card account. The secondary cardholder, on the other hand, gains access to the credit card account via their own card, but ultimately bears no individual financial responsibility for the debt owing on the account. Even if the secondary cardholder goes on a spending spree, it’s officially the primary cardholder’s responsibility to see that the debt is paid, lest it leave a black mark on the primary cardholder’s credit history.

This may not sound like the best deal in the world, especially if it looks like you’ll be the primary cardholder in the relationship. However, as well as bearing the responsibility for the credit card’s debt, the primary cardholder also receives all of the benefits from holding the account, such as improving their credit rating by demonstrating that they can manage debt, and earning any bonus points or extra rewards offered by the lender. The secondary cardholder earns no additional benefits from their credit card, other than being able to use it normally.

When it comes to credit cards, there are two common ways to share them with others. You can either get a joint credit card with your partner or another family member, or ask your card issuer to add secondary cardholders to your account. 

Both options are similar to the extent that they allow more than one person to use the same credit card account. However, there are significant differences between the two options and understanding these differences could help you make an informed choice.

Joint credit cards are typically only available to two adults who are jointly responsible for the account. A child, therefore, is unlikely to be eligible to apply for a joint credit card with a parent. However, you may be able to give a child access to your credit card by adding them as a secondary cardholder to your account. But they may need to be 16 years or older to qualify.

As secondary cardholders, children can get unrestricted access to your credit card account without any liability to pay the debt. While some parents may feel that giving their teenager practically unrestricted access to their credit card is a recipe for debt-fuelled disaster, it’s also possible that by showing your teen that a credit card isn’t an unlimited all-access pass to free money, you could help them learn more about financial responsibility in their young adulthood.

If you’re interested in offering your teen a degree of financial independence, but aren’t quite prepared to sign them up as a secondary cardholder on your credit card just yet, there are alternative options available:

• Most bank accounts for teens offer access to a debit card, allowing teens to access money from their own bank account via ATMs, or make EFTPOS transactions in shops. Some lenders offer debit cards that also provide credit card functionality, such as VISA debit cards and Debit Mastercards. These cards can be used for online and overseas transactions, but are limited by the amount of money currently in the account, so your teen won’t go into debt.
• Prepaid credit cards work in a similar fashion to gift cards from supermarkets and chain stores, in that they come pre-loaded with a balance of money, which can be spent anywhere that credit cards are accepted. Whenever the balance runs out on your teen’s prepaid credit card, they’ll have to come to you for a top-up, allowing you to have a say in how much they’re spending.