Split happens: Why a joint credit card might not be a good idea

By Jennifer Rose Hale

"I can't get a credit card on my own. Will you help?"

Imagine this conversation with your boyfriend or girlfriend, child, or even a newly divorced parent. They're asking you to co-sign on a new credit card account, and you're tempted--or pressured--to help out. It might just be one more account for you, but it can make a big difference for their financial futures. What do you do?

Opening a joint credit card may seem like a good solution for a number of situations. But signing your name to joint accounts has risks. Understanding those risks can reduce the chance that you will pay for this decision, literally, in years to come.

Best case scenario

When you share a joint account with someone, you both are equally responsible for the card's balance. Every purchase made, every charge incurred: From the issuing bank's perspective, they're as much your purchases and charges as your fellow account holder's.

If you're charging furniture for the apartment you share with your partner, these bills may make sense--your rewards card will rack up points that much faster, right?

In the best-case scenario, you and your significant other discuss charges ahead of time, both review the joint account's bill and have a plan for repaying equally. You have similar repayment habits, and the account is just one more money-management tool in your lives.

Worst case scenarios

For every one scenario where a joint credit card may work, there are at least two scenarios where it won't:

• The big split: You break up, and charges continue to show up on the card. (And not just dry-cleaning bills, but airline tickets, dinners out ... flowers!) If your former partner refuses to pay, you're on the hook--no ifs, ands or buts.
• Empty pockets: What if your partner can't pay? If you share joint accounts with a child, what happens if they simply don't have the money to pay the bill? Repossessing your son's Honda Civic isn't exactly a scene for a Norman Rockwell painting.

In the most dire situations--if your co-signer declares bankruptcy, for example--you are still responsible for the debt. And if money discussions are uncomfortable when you love someone, imagine how awkward they could be when you've moved on with your life. Or if you only see your financial partner--also known as "Mom"--at Thanksgiving.

Alternative scenarios

If you're not comfortable opening joint accounts, you do have other options:

• Authorized use: If you anticipate sharing most, if not all, expenses with your partner, you can make him or her an authorized user on your own card. You're still at risk if he or she has an undiagnosed online-shopping habit, but if a problem does arise, it's simple to remove the authorized user from the card.
• Secured card: If your partner or child just needs to start establishing his or her own strong credit score, point them to a secured credit card. These cards usually have small credit limits, and the card applicant pays a deposit equal to that amount. The card company is reducing its risk because the deposit will cover any unpaid bills, but the card still appears on the cardholder's credit reports.
• The Nancy Reagan option: Or ... just say no. This is the best solution when the person asking the favor has bad credit for a reason--huge bills, poor repayment history, defaults, bankruptcies.

Going into a joint credit card account is one option when you have a relationship with someone, but knowing the risks is the best way to protect you ...and your money.