The pitfalls of shared card accounts

Joint accounts, authorized users and co-signers clarified

By Erica Sandberg

Opening Credits

Erica Sandberg is a prominent personal finance authority and author of "Expecting Money: The Essential Financial Plan for New and Growing Families." She writes "Opening Credits," a weekly reader Q&A column about issues for people who are new to credit, for CreditCards.com. Ask a question. 'Opening Credits' stories

Dear Opening Credits,
Can you add someone as a joint account holder after you get your credit card? Is co-signing the same thing as a joint account holder? What about authorized users? I know that is different from joint account holder, but can you add an authorized user at any time? -- Rafay 

However, sometimes the answer really can go in different directions; for example, whether or not it's possible to add someone as a joint card holder to an existing credit card account. Issuers make that decision, not federal or state lawmakers, so it depends entirely on their business policy. In fact, some financial institutions that offer credit cards don't permit co-signers at all, just individual account holders. Now that I think about it, if I ran a bank, I would probably deny multiple cardholders, too. Having more than a single person responsible for payment sounds complicated.

Yes, the terms "jointly held" and "co-signed" are synonymous. Both imply equal partnership in account ownership. All parties have use of the card, as well as payment responsibility. If one person lets the account go delinquent, and the creditor decides to take the matter to court, any or all co-signers can be sued. Additionally, if you want to give a bum cardholder the boot, in most cases the balance will have to be at zero first.

You are also quite correct that authorized users are a different breed. Consider them something like honored guests -- they have a card with their name on it and can use it the same as the account's sole owner, but they bear no legal responsibility to the credit card company for repayment. The primary account holder can revoke the authorized user status at any time, without having to delete any accumulated debt. As with co-signers, however, the credit activity of all cardholders shows up on everyone's credit reports, no matter who did the actual charging or paying. Not all issuers permit account owners to add authorized users, but many do.

Though you didn't ask, here's my opinion about any type of shared accounts: In general, I don't care for them. While they can be an easy way to jump into charging and establish a credit history (especially for young adults who, because of tightened legislation, now have a harder time obtaining credit cards on their own), I really think it's best to be 100 percent responsible for your own account from the get-go.

As an individual account owner, you never have to worry if some other cardholder is off on a wild spending spree, racking up large debt that they can't pay for and that you might have to cover. And if someone besides you is supposed to manage the account properly but doesn't, your credit rating will get dinged.

Therefore, if a person can't qualify for an unsecured credit card in just his or her name, I strongly recommend applying for a secured card. By plonking down a few hundred bucks as collateral, the account owner will have a personal credit line. After a year or so of smart charging, the cardholder will probably be able to build a credit history that's adequate enough to qualify for an unsecured account. Sounds better than the riskier shared accounts, doesn't it? No, don't say, "Well, that depends ..."

See related: Authorized users aren't liable for card debt, Authorized user's bad credit won't hurt primary cardholder, How to remove an authorized user from a credit card account, How credit card reform impacts young adults under 21

Erica Sandberg's articles and insight are featured in such publications as the Wall Street Journal, Pregnancy, Babytalk, Redbook, Bank Investment Consultant, Prosper.com, MSNMoney.com, and Smartmoney.com. An active television and radio commentator, Erica is the credit and money management expert for San Francisco’s KRON-TV, a frequent guest on Forbes Video Network, Fox Business News, Businessweek-TV, and all Bay Area networks. Prior to launching her own reporting and consulting business, she was affiliated with Consumer Credit Counseling Services of San Francisco where she counseled individuals, conducted educational workshops, and led the media relations department. Erica is a member of the Society of American Business Editors and Writers, and on the advisory committee for Project Money.

Send your question to Erica.

Published: October 5, 2011

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