Credit cards offer exceptional financial benefits, and in Canada, you can share these benefits with family members, business colleagues, and even partners. When a credit card is shared between two people in Canada, it is referred to as a joint credit card. There are various arrangements under which users can hold a joint credit card, each with its unique features and responsibilities.
Let’s dive into the arrangements.
Primary Applicant or Credit Card Holder
In some instances, a primary applicant must first get the credit card in their name and then apply for additional cards for other users. The primary applicant must meet the legal age requirements, which vary between provinces in Canada. The primary cardholder can apply for supplementary cards for others, bearing responsibility for any outstanding debt. This is crucial because all purchases made by the additional users will also appear on the primary cardholder’s statement.
You can add an authorized user, such as a spouse or child. Many credit card issuers allow cards for children under the age of majority. As the primary holder, you'll receive the monthly statements and thus can monitor the spending of authorized users. However, authorized users can use the card just like the primary holder, without the obligation of paying back the debt. One downside for authorized users is the potential lack of credit history building, as the responsibility of debt repayment rests with the primary holder.
Employee Credit Cards
Additional credit cards for employees can be an excellent way for businesses to manage spending. These cards allow employees to make business purchases, with the primary account holder (usually the employer) keeping track of expenses. However, these cards typically do not contribute to the employees’ personal credit histories and often exclude access to rewards and benefits.
Becoming a guarantor for someone who doesn’t meet the credit card criteria means extending a promise to cover their debt if they fail to pay. In this arrangement, only the guaranteed person receives the card and enjoys its benefits. However, since you are liable for any missed payments, it is still considered a joint arrangement.
Applying for a credit card with another applicant as co-borrowers is a true example of a joint credit card. Both applicants must be of legal age and financially responsible for the credit card liabilities. In this setup, both parties are liable for any outstanding debt and can use the credit card freely, enjoying the associated rewards and benefits.
Why Opt for a Joint Credit Card?
Joint credit cards offer several benefits:
For primary applicants, it simplifies monitoring expenses of family members.
Employers find employee credit cards useful for tracking business-related spending.
Co-borrowers can jointly manage expenses, ensuring mindful spending.
For those with lower credit scores, being guaranteed by a financially stable individual can provide access to a credit card, helping to build or improve credit history.
Key Considerations for Joint Credit Cards:
In co-borrower setups, both users are responsible for managing credit card activity and are equally liable for debt repayment. Missed payments can affect both parties' credit scores.
For cards with a primary holder, credit activity impacts the primary holder's credit score. Monitoring credit utilization is essential to maintain a healthy credit score.
The application process for co-borrower cards involves assessing both applicants' financial credentials, while primary holder applications are less scrutinizing.
All users generally have access to the card's features, subject to the credit limit. Employee cards, however, typically exclude rewards and benefits.
Joint credit cards can be a practical solution for various financial needs and relationships. Understanding the different types of joint credit arrangements, their benefits, and responsibilities can help you make an informed decision about whether a joint credit card is right for you. Remember, with shared credit comes shared responsibility, so choose wisely!