Sharing credit card accounts
For years, parents have added their teens as authorized users, helping their offspring establish credit while still maintaining control over the spending. "This can be a great way to teach children how to be financially responsible and how to use credit wisely," Williams says.
In some cases, account holders can even set spending limits for each authorized user on the account, Gupta says.
However, if the account owner has a problem that results in a negative credit item being reported, the authorized user's credit also may be negatively affected. "Usually, authorized users have no idea what's going on and, while they aren't responsible for the debt and can't even take their names off the account on their own, they could get hit with the negative trade line on their own credit report and get a lower credit score," Williams says.
And even though authorized users are not technically responsible for debt repayment, "lawsuits have been maintained against AUs for expenditures run up not by them but by the card owners who defaulted," Rose says. "Once a lawsuit is filed, if the AU fails to answer a summons or effectively defend against the charges, they find themselves stuck with a judgment for charges they never incurred. Since anywhere from 60 percent to 80 percent of credit card lawsuits end in default judgment, one assumes this is not an infrequent occurrence."
When it doesn't work
For joint account holders, the advantage is sharing financial responsibility and helping one card holder qualify for the credit they desire, says Wayne Sanford of New Start Financial Corp. Generally, holding a joint credit card account is a good way for couples to manage household expenses, and both parties are legally responsible for the debt.
However, that shared responsibility can also be the "down side" of a joint account, Gupta says. "In case the relationship (between the two account holders) sours, there's a great chance for disagreement," he says. "The other person could intentionally spend (to increase the balance out of spite)."
In the case of a divorce, even if the legal proceedings specify which spouse is responsible for outstanding credit card debt, "card issuers, or collectors working on their behalf, are not bound by this," says Fred Williams, author of "Fight Back Against Unfair Debt Collection Practices."
"They can try to collect from either or both spouses who were (account holders). This is because the contract governing the account is still in force and is not modified by the divorce proceeding."
The bottom line is that linking your credit with another person's credit always has the potential for risks and rewards. "Only add authorized users or (become) joint account holders who you trust to make payments and who will not abuse the credit card account," Williams says.