Think you're a joint account holder? Think again

Sharing a card can backfire when it comes to who's really liable for the bill


Think you're a joint account holder? Think again
Think you're a joint account holder? Think again

If you have a credit card you share with another person, it's easy to assume you are joint account holders and, as such, both responsible for any debt racked up on the card.

However, that's probably not the case, according to Houston divorce attorney Brian McNamara. It is far more likely that one cardholder is 100 percent legally responsible for the balance and the other is just an authorized user -- free to use the card, but just as free to walk away and leave the bill behind.

If all goes well with your finances and your relationships, you may never have a reason to find out for sure if you share card account responsibility or if one of you is actually just a guest on the card. And you may think it doesn't matter.

But when a relationship ends or there's some disagreement over who should pay off a credit card debt, the discovery that you're not both equally responsible often comes as a surprise. "It's usually a pleasant surprise -- for the authorized user," says McNamara, who has seen this happen over and over again.

The person who is then stuck with sole responsibility for the debt may be shocked. But, being the sole cardholder doesn't really change that primary cardholder's status, McNamara points out. He or she was liable for the balance from the start. What's upsetting is discovering the other party bears no responsibility at all.

Why you may not be a joint account holder
Unless you and your spouse, business partner or other person applied for a credit card together, you almost certainly do not have a joint account. It's easy to add another person to a credit card as an authorized user, though. Once an account is established, it's much more difficult (if not impossible in many cases) to add a joint account holder. The credit card is approved and the terms are based on one person's income and credit score. If you want a joint card with someone, you may have to apply for a new card together.

Joint cards are often a source of contention, especially in divorces and other relationship breakups. You can imagine how often people think they can split their debts equally when they break up, or believe they can assign accrued debt to the party who ran up the charges. With a joint account, the credit card company won't agree to that. If your ex won't pay, you're most likely stuck with the whole thing unless you want to take your ex back to court.

I always advise calling the card issuer directly. Sometimes, the card issuer refuses to discuss the account because the caller is not 'on the account.' That answers the question.

-- Brian McNamara
Houston divorce attorney

Perhaps because of these situations, banks are leaning toward single account holder contracts. Since 2013, for example, Chase Bank hasn't issued new joint accounts. Other banks, including HSBC and Capital One, stopped offering joint accounts several years prior to that.

How to tell if you are a joint account holder or authorized user
You'd think you could just look at your card statement to see if you are a joint account holder or authorized user. Surprisingly, it's not so easy. If there's only one name on the statement, that person is probably the only account holder and liable party. If both your names are on the statement, that might be a clue that you're joint account holders. It's only a clue, however.

"I always advise calling the card issuer directly. Sometimes, the card issuer refuses to discuss the account because the caller is not 'on the account.' That answers the question," says McNamara.

If you and the other party disagree about who is legally liable for an unpaid balance on a shared card, calling the card issuer should clear things up. McNamara has never had a situation where someone disagreed with what the card issuer told them. If there is a dispute, the issuer should be able to produce paperwork or online information showing to whom the card was issued, but that should seldom be necessary.

Beverly Harzog, author of "Confessions of a Credit Junkie: Everything You Need to Know to Avoid the Mistakes I Made," looked on her Equifax credit report to see if she could tell which accounts were joint. "If you look at each item for your credit card account, there is the account number, status and account owner." She notes that some accounts refer to primary and secondary cardholders. "There's no set way to refer to things. I have one joint account with my husband. On one account, I'm an authorized user. My American Express just says individual." Harzog also recommends calling your card company to remove any doubt.

Shared card charges linger when relationship ends
The story can go like this: A couple, married or not, share a credit card. They don't remember who is ultimately responsible for repayment and don't care. But one day, the relationship ends, and they assume they've closed all accounts they had together. Months or years later, one party starts getting collection calls about an unpaid credit card debt. It turns out that not only was the card not closed, the party receiving the collection calls is the primary accountholder who is now being held responsible for unpaid charges on the card.

The hard news is that unless fraud is involved, the authorized user can walk away. The cardholder, who may or may not have charged anything on the card, is responsible for 100 percent of the balance.

The authorized user may not get away with nonpayment if the charges were made before a divorce is final. A divorce court can take all assets and debts into consideration before deciding on a settlement. In other words, if John charged $100,000 on Suzi's card while their marriage was on the rocks, the amount he gets in the divorce settlement may be reduced accordingly.

McNamara says, "This is the biggest factor that minimizes the impact of joint card vs. authorized user. A judge can order marital assets sold to satisfy debt incurred during the marriage and can also offset the asset division for the same reason."

A divorce judge has no power to change the credit card contract, however, so the divorce decree can't take one person off a card or make someone liable for a debt on a card that wasn't theirs initially.

What a judge can order is that a person pays all or part of the balance on a spouse's card. However, enforcement can be difficult. If the payments are late, the primary cardholder will still get a negative mark on his or her credit report, regardless of what the divorce court said. Worse, if the authorized user who was ordered to make payments declares bankruptcy, the primary account holder is still liable for the balance. That's why the best way to make a clean break in a divorce where substantial credit card debt is involved is for the judge to order that proceeds from the sale of an asset, such as the house, be used to pay those debts off. Then any card accounts should either be closed or authorized users removed.

In community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin, with Alaska being an opt-in state), the authorized user may not be able to walk away from the debt as easily as in a non-community property state. "When the authorized user thinks he doesn't owe anything, creditors in a community property state may view things differently," says Harzog. Creditors may pursue both parties for debts run up during the marriage, even if the other person was not on the card at all.

How to prevent joint versus authorized user problems
The easiest way to avoid confusion and potential problems with joint and authorized user issues is to have your own credit cards and don't share them.

For married couples and in some other situations, such as a parent and teenage child, however, joint cards can serve a purpose, but typically just adding someone as an authorized user will do the trick. Harzog says that it's fine to have a joint card or two with a spouse, but you should also have your own. "Get your credit cards in your own name. You could have an unfortunate incident, your husband could die or you could have a divorce," she says. You need to get your own card before you go through a life trauma.

Now would be a good time to go through all your cards and make sure you know the ownership status of each card. You might be surprised.

Plus, before you open a card with someone or add someone to your card, talk about it. "Hopefully, before you agree to open the account, ask yourselves, 'How do I really want to do this?' Make sure you're on the same page about how you're going to use this card; how much you're going to spend on this card. Get into details about who's going to use the card and what kind of expenses you're going to put on it," says Harzog.

Harzog adds, "One of the most important conversations about a credit card is who is paying the bill. I see this all the time. People say, 'I thought he was paying the bill; I thought she was paying the bill.' Be sure payment reminders are in place and auto bill payments are set up. You're both responsible for this debt, so you both have to know what's going on."

See related: Is husband liable for wife's $50,000 card debt?, Clearing authorized card user account information

Published: October 8, 2015

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Updated: 10-24-2016

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