You've shared dinner, vacations and maybe even an apartment with your sweetie. But one of the biggest steps you can take with your significant other is sharing financial responsibility of ajoint credit card.
"This is a huge commitment," says Kim McGrigg, a spokeswoman for Money Management International, a national credit counseling company. "I think it's something that most people just don't take seriously enough."Merging finances can't save a relationship, but it can easily destroy one.
Intertwining your financial life with someone else is a decision that can have far-reaching consequences. So if you're unmarried but thinking about opening joint credit, be sure you've talked through these six important questions before you sign on the dotted line.
1. Is it really time to merge our finances? Joining financial forces can have a lot of benefits: It can add psychological heft to a relationship, it can encourage openness about money, and it can make joint purchases -- from a couch to a car -- a simpler process. But it can also get complicated if you and your significant other don't last, says Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling. "Undoing a financial arrangement can be very difficult," she says.
2. Would a card with an authorized user work just as well? A joint credit card makes both users legally responsible for the bill -- even if it's just one person who runs up the balance. "When a relationship goes sour, people can be vindictive," says Cunningham. That's because some people become so angry that they don't care about the potential effect of their actions on their credit. "They'll run up a balance and then file for bankruptcy if that means you'll be responsible for paying off the bill," she says.
One way to circumvent this problem is to add your significant other as an authorized user to your card. As the cardholder, you'll have the power to cut your sweetie off if he or she starts misbehaving financially.
3. Do I know everything important about my significant other's financial past? It's acceptable to overlook a lot of your significant other's flaws -- but glossing over a spotty financial history could have a serious impact on your life. "It's probably the most unromantic date idea ever, but you should consider pulling your credit reports and going over them together," says Liz Weston, author of "The 10 Commandments of Money." Look at the report with the same careful eye that any potential creditor might, she adds. "Do they pay their bills on time? Do they have big debts or accounts you didn't know about?" If you see anything that looks fishy, it might be time to put the brakes on your financial merger.
4. Are we both on the same page financially? Because this isn't a decision to take lightly, you need to be completely open with your significant other. "You want to have a discussion about your partner's priorities and financial goals. What are their values? Do they have a plan for the coming years?" says McGrigg. It may sound more rigorous than a job interview, but when you enter into a financial commitment, you'll need to have a serious conversation. After all, if one person plans to quit working a 9-to-5 job to start a new company funded with credit card cash advances, it's best to know that before both of you are paying the price of that decision.
5. Have we agreed on what expenses are appropriate to put on the card? It might be obvious to you which expenses should be put on the card and which shouldn't, but one person's obvious may be another person's "Whaaaa?" Talk about it beforehand. Discuss the types of expenses and total dollar amounts that make sense for your budget, says Weston. "You don't want to have to check with the other person for every $5 purchase, but you don't want your beloved going out there and buying a whole new wardrobe or motorcycle, either," she says. "You have to figure out when you'll check in with the other person. There's no hard-and-fast rule, but it's a conversation you should have before you get the card."
6. Do we know who will handle the day-to-day management? It's critical to make sure that you and your honey have the same basic financial goals and philosophies, but it's also critical to make sure your card is getting paid on time every month, says McGrigg. "Having a conversation about logistics is a great idea," she says. "There's a lot of boring, but incredibly important paperwork that goes along with managing a credit card and taking care of the account." From checking for unauthorized expenses to paying the bill, you need to make sure that one of you will be taking care of the details.
If you're comfortable with the answers to these questions, you're probably ready to make the plunge with a joint credit card.
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