5 Tips for Couples With a Shared Credit Card
Sharing important areas of your life — including your finances — is a common part of building a deeper relationship with a long-term partner. Whether you’re newlyweds in need of a shared credit card, or in a committed relationship and want a shared card to cover date nights and communal household supplies, opening a credit card account together can be a useful financial tool.
Learning a few key credit card strategies for couples can help you and your spouse or partner manage expectations for the new card. Here are a few tips for a more positive shared credit card experience.
Related: 6 Great Habits of HIghly Effective Cardholders
1. Choose a card that meets both of your needs
Before submitting an application, it’s important to talk candidly about what you’re looking for in a credit card. For example, is cashback on statements more appealing or would travel benefits, like a TSA PreCheck credit be more useful to both parties?
To assist in the conversation, focus on your mutual goal for the shared card, and learn which elements of the card are essential versus flexible to find common ground.
2. Define parameters on how to use the card
How you and your partner choose to use the card is a very personal decision, and is influenced by what your goal is.
Let’s say that you and your spouse agree to open a new travel rewards credit card, with the goal of earning as many points on the card as possible to redeem the rewards toward a couples’ vacation abroad. In this case, you and your partner might agree that all purchases — whether for personal shopping or shared expenses, like utilities and household groceries — can be charged on the shared credit card.
If you feel that splitting the payments might get too complicated this way, you may choose to only use the card toward shared costs, exclusively (i.e. rent for a shared apartment, dates and joint activities, and other split household expenses). However you decide to use your card, it’s important that both parties agree and respect the established boundaries that are agreed on.
3. Set an agreed credit utilization ratio
A credit utilization ratio is the amount of credit you’ve used compared to the total available credit you have. 30 percent of your FICO credit score takes your credit utilization ratio into consideration. Although it’s typically based on your total accounts, it’s a good idea for couples to monitor their utilization on shared credit cards, too.
To calculate this ratio, simply take your card’s account balance and divide it by your credit limit. If the credit limit on your shared credit card is $7,800, for instance, and you have an unpaid balance on the account of $2,300, your credit utilization ratio on the card is about 29%. In this case, you’re close to exceeding the suggested utilization ratio.
To adjust it, pay down the account before continuing the use of the shared card.
4. Determine who’s responsible for submitting the payments
Deciding who’s responsible for actually setting up or making the payments depends on how you and your partner used the card in the first place. Couples who only used the card for shared items that are split 50-50, can set up one automatic payment from a joint deposit account. Another option is making one party responsible for submitting the payment while the other partner reimburses the payee each month.
Regardless of how you choose to set payments up, it’s important to clarify this detail as soon as you receive the card to avoid missing a payment. Missed payments can jeopardize one or both parties’ credit, depending on how you opened the account.
5. Figure out your rewards redemption strategy
Couples who plan on reaping the rewards of points or miles toward a joint experience or statement credit have it fairly easy when it comes to rewards redemption. Simply, decide on a reward milestone (e.g. at 150,000 points) or interval (e.g. every six months or every year), to redeem earned rewards on the shared card.
You may also decide to alternate who gets to claim rewards at a given point. For instance, one partner may redeem all of the earned rewards after a year on something that they want while the other partner agrees to claim all rewards the following year.
Is opening a shared credit card a good idea?
Allowing your partner to be an authorized user on your existing credit card account — or having you be an authorized user on their card — is helpful in a few ways. Aside from conveniently having added purchasing power for shared expenses while benefiting from the card’s perks.
It’s important to make the distinction that adding your spouse or partner as an authorized user on a credit card isn’t the same as opening a joint credit card. The former doesn’t require a credit check from your partner and you’re 100% responsible for the debt. A joint credit card, on the other hand, has many risks, like potentially affecting your credit, and both parties are responsible for the debt.
Ultimately, whether a shared credit card is a good idea is a decision that’s solely between you and your partner.
If you or your partner need guidance about opening a shared credit card, a financial coach at The Gym can offer resources and insight to help you decide the right credit strategy for you. Reach out for a complimentary consultation today.
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