By now, almost everyone knows that the ‘plastic’ cards can be damaging for the finances, if they’re not used sensibly. A credit card in the wrong hands can bring about financial ruin to an individual. Therefore, sharing your credit card account with another individual is something that most consumer advocates strongly advice against. Yet, some people opt for it for the ease of access.
Often parents share their credit card accounts with their children pursuing higher studies and are away for the purpose, so that they can use the cash during emergencies. Married couples are also found to share their financial responsibilities through joint accounts. Individuals may also need to share their accounts with a family member or friend if their bad credit makes it difficult for them to get an individual account.
How the credit card accounts are shared?
Before you agree to have a shared account and your finances with someone, you need to know how these kinds of accounts function. The credit card accounts can be shared in the following ways:
- Two individuals can be joint account holders – In this case, two persons can apply together for the same credit card account. Each of the applicants will have the charging benefits for the account and be equally liable for the debts incurred. As a result, often one account holder ends up paying charges for a joint account, even if he or she didn’t bring on the debt. This form of account often causes issues between couples when they file for their divorce.
- One person can be named as an authorized user – The original account holder can appoint a second individual as an authorized user to his account. Both the users will have the charging privileges, but the original cardholder will be held liable for the entire debt. Some states however, allow the liabilities to be shared by the authorized user as well.
- One person can be the co-signer for the account – Usually, individuals with bad credit aren’t allowed to open up new lines of credit. In that case, a person with good credit can co-sign on the credit account. A co-signer for an account is held responsible for any and every due on the account, if the account holder defaults. The co-signer doesn’t have the charging privileges though.
- One individual can act as guarantor for the other person – Being a guarantor and a co-signer usually means the same, though there is some basic difference between the two. The guarantor has to pay the debt on the account, in case the account holder fails to do so. However, being a guarantor is comparatively better than being a co-signer. The lender or the bank can only come after the guarantor if all other means of collection from the original borrower fails. Whereas, a co-signer is held liable as soon as the original account holder defaults on a bill.
While it might be easy to wipe off authorized users from an account, giving up your guarantor status, co-signing and joint account holder relationship is a lot more complicated. Since no one can predict the future, it’s evidently better to hold individual accounts than sharing an account with another individual. Issues may crop up and give rise to complications when individuals part ways or relationships turn bitter.