Adding an additional cardholder to your credit card account can offer several benefits, but it's also important to weigh the drawbacks.
Benefits of adding an additional cardholder
Having an additional cardholder can increase the earning potential of your credit card account and be a helpful financial tool.
- Trigger a sign up bonus faster. With more cardholders, it's easier to hit the spending target and get the bonus points.
- Earn more reward points. Putting more spending through the card by adding an additional cardholder can help you earn more reward points, faster.
- Attain a higher tier earn rate. Depending on the card, having an additional cardholder may help you reach a higher tier of earning rate, resulting in more points per dollar spent.
- Simplify finances. Having everything on one statement can simplify your finances and make it easier to track spending, especially for families.
- Educate kids about credit. Children can get used to having a card and learn how to use it responsibly, especially if there are spending limits set.
- Help someone with bad credit. If someone you know has poor credit, adding them as an additional cardholder to your account can help them with everyday transactions such as hotel reservations and car rentals.
Drawbacks of adding an additional cardholder
While there are benefits to adding an additional cardholder, it's important to be aware of the drawbacks.
- Higher credit utilisation ratio. Because of the increased spending, adding an additional cardholder can result in a higher credit utilisation ratio, which can impact your credit score.
- Managing the account. As the primary cardholder, you are responsible for managing the account, which includes making payments and keeping track of spending.
- Annual fee per additional card. Some credit cards charge an annual fee for each additional cardholder, although many do not.
- Potential credit score impact. The additional cardholder's irresponsible spending and reckless use will affect your credit score, not theirs.
- Interest charges. If the balance isn't paid off, interest charges can accumulate and complicate the situation.
- Changed relationship. Having an additional cardholder can change the dynamics of your relationship with that person since you may need to chase them for money.
- Quickly hitting a points cap. If the additional cardholder uses the card a lot, you could hit a rewards points cap, meaning you'll have to continue spending with your card and earn no points or use a different card to earn points.
How to compare credit cards with additional cardholders
Before settling on a card, check how it compares across the following factors.
- Additional annual fee. Not every credit card has free additional cardholders, so it's essential to check if this fee applies and how much it is.
- Earn rate. How many points per $1 spent would the credit card earn?
- Points caps. Is there a limit on how many points can be earned? Ideally, there is none, but if there is, would your combined spending exceed it by much?
- Interest rates. Although carrying a balance quickly negates the value of any points earned, it's still important to know what it would be on purchases, cash advances, and so on.
- Number of additional cardholders allowed. Will you be able to add everyone you want to?
FAQs
Can I add a family member as an additional cardholder?
Yes. You can add a family member, such as a spouse or a child, as an additional cardholder on your credit card. You may be able to add trusted friends too.
Can the additional cardholder use the card without my permission?
Yes, additional cardholders can use the card just like the primary cardholder. This may be convenient, but limiting how much they can spend is a good idea.
Is there a fee to add an additional cardholder?
Some credit card issuers may charge a fee for adding an additional cardholder, while others may not. You should check with the issuer for specific details.
Will adding an additional cardholder impact my credit score?
The act of adding an additional cardholder will not affect your credit score. However, increased spending can increase your credit utilisation ratio, and that can. You will be held liable for the additional cardholder's irresponsible spending, for example, exceeding the credit limit.
