Should I Combine Credit Liabilities With My New Spouse?

John Ulzheimer

John Ulzheimer | Blog

Mar 25, 2013 | Updated Apr 27, 2016

Money, and how couples manage that money, are two of the most common causes for disrupting – and sometimes completely wrecking – marital bliss. Whether you’re recently engaged or newly married, how you’ll manage your money and your financial obligations as a couple is an important subject that you should both take the time to seriously consider and openly discuss.

Having the “credit chat” may be uncomfortable, especially for couples that have opposite financial personalities, but addressing your financial habits and how you’ll manage your finances as a couple from the start, can save both parties a lot of pain and suffering, and possibly your marriage later on down the road. Point being, it’s better to identify potential financial problems now rather than on your honeymoon.

As a couple, one of the key decisions you’ll need to make is whether or not to keep your accounts separate, merge your finances together jointly, or possibly a combination of both. For major purchases like a mortgage, you’ll obviously want to manage on a joint level – and most lenders will require both parties to even qualify for the loan. However, when it comes to credit cards, how do you determine which option is best for you as a couple?

Opening A Joint Account

For newly married couples it’s easy to get caught up in the ‘togetherness’ of the relationship and jointly apply for a credit card with your spouse. However, before you jump the gun and apply for joint credit card accounts there are a few important factors to consider.

When you apply for a joint account the credit card issuer will review both of your credit reports and scores. If both of you have great credit you shouldn’t have any trouble qualifying, and the joint account will be reported in both of your credit reports. As long as the payments are made on time and the balances are kept relatively low, a joint account can benefit both of your credit scores. On the other hand, if the account is mismanaged or one of you misses a payment, both of you will suffer.

Opening a joint account means that both of you are legally liable for any charges or debts incurred on the account. If you opt for a joint account, make sure you have a solid strategy on who will pay the bill and how you’ll manage the account. And lastly, it’s not something any newlywed couple wants to think about but the fact is that 50% of marriages end in divorce.

Because of the joint liability, joint accounts are often one of the messier aspects of divorce because there’s no clean way to separate the account. Regardless of who the judge orders responsible for the account, both parties are still liable and joint accounts are one of the main culprits for the credit damaging results that typically go hand in hand with divorce.

Keeping It Separate

Probably the easiest and least complicated option is keeping things separate and maintaining each of your individual credit card accounts that you carried while you were single. Each of you would simply continue to manage your individual accounts as you did prior to tying the knot.

Neither spouse would have to worry about unintentionally impacting the others credit in the event one of you misses a payment or runs up a balance on a card. Any credit damaging consequences would be limited to the individual because only the respective account holder is liable for how the account is managed.

This is also a good option for couples that have very different financial personalities and spending habits, and can alleviate arguments that you’d normally see with jointly held accounts. In short, each of you would be responsible for your own individual accounts and subsequently, your credit report quality and credit scores based on how you manage those individual accounts.

Adding Your Spouse As An Authorized User – A Better Idea

Maintaining separate accounts may be the least complicated route, but it doesn’t necessarily make it easy for handling joint household expenses or joint purchases that you’d rather share. As a couple there will be certain cases where you’ll want to manage and share specific household expenses or certain types of purchases on one account that both of you can access and manage.

Adding a spouse as an authorized user on a credit card account will allow them to make purchases and use the card just like they would if the account were in their name. The difference, however, is that only the primary account holder is liable for the account.

It’s important to note that authorized user accounts are reported in the authorized user’s credit report and even though they aren’t legally liable for the account, it will be factored in their credit scores. As long as the account is managed responsibly, the account will have a positive impact on your spouse’s credit and credit scores. If it’s not, the opposite is true and it could hurt them. The good news with authorized users is that they’re just as easy to remove as they are to add – which makes them a more viable option over a joint account for both this reason and in the unlikely event of divorce.

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