Joint credit accounts are commonly pursued by individuals looking to strengthen their credit but need another to do so. Parents often open accounts with their teenagers so that they can start building their credit score from early on while couples use them as a way to mutually manage finances. With a joint credit account, both individuals can make charges to the card, use of the card shows up on both user’s credit history, and creditors can pursue either individual in regards to payment delinquency.
Before deciding to open a joint credit account, it’s vital to know the full scope of what having one entails. Look into these pros and cons of having a joint credit account and discover what exactly you’re signing up for.
Pros of Joint Credit Accounts
Before we get into why not to open a joint credit account, you should know that there are many perks of opening a joint account. These include:
Help Getting a Credit Card
Oftentimes, an individual’s credit is too poor to get a credit card independently; however, with a joint account, the creditworthiness of both individuals is assessed before an approval is granted. As a favor, someone with good credit can help a less qualified friend or loved one acquire credit by opening a joint account.
Whether both individuals plan to use the card or not, there will be a shared bill. This is highly advantageous as account holders share the task of making timely payments on the account. People often split payments, which allows them to make a payment every other month rather than every month.
Help Improve Credit
For those who may have had trouble acquiring credit on their own, a joint account not only allows you to obtain credit, but you can simultaneously build your credit. By making regular, timely payments, your credit score is likely to increase. Your credit score can also improve due to the simple fact that opening a new line of credit lowers your credit utilization rate.
Cons of Joint Credit Accounts
Some of the same things that make joint accounts beneficial can be considered drawbacks. The disadvantages of having a joint account include:
When you miss a payment, and a late fee is administered, it affects both cardholder’s credit. It doesn’t matter if one person regularly pays their half of the bill; if the other person fails to uphold their end of the bargain, both parties suffer. What may have started off as an effort to improve one’s credit can quickly backfire.
If account holders have a dispute or fall out, one can use the joint credit card as a mean of revenge. An authorized user can go on a spending spree and run up the balance on the account, aware that they are mutually responsible for making timely payments.
If that individual came into the situation with poor credit, one more delinquent account on their credit history might not make much of a difference, but it can wreak havoc on the credit score of the other account holder.
Relationship issues often arise as a result of joint accounts. Whether it be between a mother and child or spouses, issues like overspending, missed payments, and poor communication regarding the status of the account can lead to problems in a relationship. This often leads to individuals canceling joint accounts not long after opening them.
With these risks and advantages in mind, do you believe you can benefit from a joint account?
If you’ve already opened one and are facing legal issues, reach out to Illinois credit card debt attorney Heather Benveniste of Benveniste Law Offices. She can look into the origins of the lawsuit and engage in negotiation with creditors and debt collectors on your behalf. Contact us today at 1-800-497-5358 for a free case evaluation.