Why a joint credit card is usually a bad idea

Tuesday, 10 December 2019

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Don

There are two ways of getting a credit card:

i) you can get a card in your own name

or

ii) you can be the "secondary cardholder" on someone else's credit card (typically your spouse)

Many people consider this second situation as having a "joint credit card". In fact, there is no such thing as a joint credit card. There is always a primary cardholder and a secondary cardholder. While the secondary cardholder might have their name printed on their credit card, the account is actually 100% in the name of the primary cardholder (who is still, sadly, typically the husband). When the secondary cardholder uses the card to spend (i.e. borrow) money, they are actually spending (i.e. borrowing) money in the name of the primary cardholder.

What this means is that the credit card does not appear on the credit file of the secondary cardholder at all. This might not seem like a big deal, but it means that the secondary cardholder is not building up any credit record in their own name. Unless the secondary cardholder has other credit accounts of some kind it can mean they end up with an "empty" credit record, making them effectively invisible to the financial services industry. This can make it impossible for them to do basic things like get a new mobile phone contract.

This problem can be particularly acute in situations where one person in a household puts everything financial in their name (e.g. the utility bills, the credit card, the phone bill). In this instance the other person (sadly this is often the female partner) ends up with no credit record of their own at all.

Not only this, but new problems are emerging for secondary credit cardholders. Banks now have to verify each online transaction, to reduce fraud. They typically do this by texting you a code to enter online. However, for secondary credit cardholders this code is often texted not to them, but rather to the primary cardholder, who may not even be physically present.

As such, our advice, where it is possible, is for each person to get their own credit card. That way, everyone builds up their own credit rating, and also won't get caught out by the new transaction verification codes.

If you are struggling to get a credit card, perhaps because you don't have enough of a credit record, start with a card issuer like Vanquis or Aqua who specialise in this area. Putting one or two items on the card per month is fine. But you must pay back the balance in full each month, or you will only make your credit rating worse rather than better.

Chartered Financial Planners. FCA Regulated (FCA no. 603653). Free initial assesment.