Not sure if it's worth paying another annual fee for an additional cardholder just to rack up more reward points? The idea of running more spending through your account may sound appealing, but there's a chance it could be a fool's errand.
Scroll on for a deeper look at the pros and cons, plus how you can work out if having additional cardholders makes sense in terms of earning points.
Note every card charges an annual fee for additional cards. Compare these credit cards with free additional cardholders.
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Key takeaways
- It is worth paying an extra annual fee for an additional credit card if the rewards points earned are greater than the cost of the fee.
- Always check the terms and conditions of the credit card to see if there is an additional annual fee for an additional card.
Best practices
There is no credit check to add an additional cardholder, but that doesn't mean it's fair game to hand them out like candy. Remember that it is your responsibility to manage the account.
Consider who should get an additional card
An additional cardholder can use their card like it is their own. They can shop online, use it to pay for flights, reserve a hotel, etc. But they are not responsible for the repayment.
Your kids, for example, could run up a monumental balance, and you could be left to foot the bill. If the additional cardholder can't afford to pay what they owe — assuming that's the deal — you'll have to cover it, or the balance will carry over and start to incur interest.
If you are not sure they use the card responsibly, don't set it up in the first place.
Set limits
Even if you trust the secondary cardholders on your account, set limits to prevent them from overspending or exceeding the credit limit.
For example, you could set a daily or monthly spending limit or a combination of both.
Account management is ultimately your responsibility. The implication is that your credit report takes the hit if things go wrong, even if it wasn't your own spending that caused the problem.
Monitor closely
The buck stops with you, so you should keep a careful eye on how any additional cards are used.
You can take simple steps to make it easier to monitor spending, such as installing the bank's app and setting up notifications. Be proactive if you notice the cardholder spending too much.
Pros and cons
Pros
- More spend, more points. Since all the spending goes through your account, you earn all the points.
- Less likely for points to expire. Keep your account ticking over because of increased activity.
- Oversee spending, especially for kids. It can be a useful way to teach kids about managing money whilst parents can monitor and control spending. It's not without risks, though.
- Manage family expenses in one place. Additional cardholders can simplify family budgeting (but it can introduce complexity too).
Cons
- Added cost. Paying an annual fee per additional card may not make the points worth it. Some cards have free additional cardholders.
- Not everyone is suitable or interested. It can be tough finding people who are not interested in earning points for themselves.
- Account management. An additional cardholder who is not responsible for the effects of their spending can lead to problems with repayments that impact your credit score.
How to work out if it's beneficial
When deciding if it's worth paying an extra annual fee for an additional card, it's important to weigh the cost of the fee against the value of the rewards points earned. For example, if the additional card has an annual fee of $50 and you expect to earn $100 worth of rewards points each year, it would be worth paying the fee.
Is it worth it?
Whether or not it's worth paying for additional cards depends on how much you value the rewards points earned, and that depends on how you use them.
Say your card's annual fee is $350, and each additional card costs $100 per year. Additionally, the card earns 1 Qantas Point per $1 spent, with each point valued at 1.25 cents for short economy flights and 8 cents for international business class flights.
To determine if it's worth paying for additional cards, you would need to calculate the value of the rewards points earned compared to the cost of the additional annual fee.
For example, you expect to earn 5,000 points from an additional card with a $100 annual fee and use them for short-haul Economy Class redemptions, where points are valued at around 1.25 cents each. The points would be valued at $62.50, less than the annual fee.
However, if you earned the same number of points and put them towards an international Business Class redemption where points are valued at 8 cents each, the points would be valued at $400, which is a net benefit to you.
FAQs
Can having additional cardholders affect your credit score?
Having additional cardholders on your account will not directly affect your credit score. However, their spending can increase your credit utilisation ratio, which can cause your credit score to decline until reduced.
Can an additional cardholder use their card to build their credit?
No, additional cardholders can use the credit card to spend, but since the account is not in their name, their credit score does not stand to benefit from good account management.
Who earns points from additional cardholder spending?
The primary account holder earns points from additional cardholder spending.
