After we decided how to pay the bills, we moved onto my next spreadsheet of choice:
We’re both in our 30’s, have our own credit histories (both of which are very good) and don’t need to build credit.
Since we both have long-established credit histories, we need to decide what to do with all of those accounts we have. I have two regular credit cards and one store card, and he has an impressive 5 cards (one of which is corporate) and 4 store cards.
We do not need 12 credit cards. And what about joint accounts? What does that mean? Can I just add him to my account?
Initial research (ie: talking to my married friend) said that there was no difference–we don’t need to open a new account, we can just add each other to our existing accounts.
That certainly sounded easier, but isn’t exactly correct:
According to creditcards.com, there are three kinds of account holders:
Joint credit: Both parties apply for credit, and are both responsible for the bill.
Authorized User: One person applies for credit and the other is added to the account. Only the account holder is responsible for the bill. (Parents often use this for teenage children to teach them about credit.)
Co-signer: You are responsible for the debt, but cannot access the line of credit.
So do we need to build credit together?
That’s only sort of a thing. There is no such thing as a joint credit report; every individual has their own. Here’s my understanding: If we want to, say, buy a house, we could apply for a loan in both names and the get approved, both of our credit reports would be pulled and the approval & interest rate (better credit = lower interest) would be based on the combination of the two reports–and both incomes. If we default on the loan? It hits both of our credit reports. For some couples, where one partner has a lot of debt or a bad credit score, it makes more sense for only the partner with good credit to purchase a house for a better rate, but that does mean only that partner’s income can be used to qualify. That also means the only person responsible for the debt is the one who signed the loan.
Does this matter to us? Not really. We both have good credit scores (mine is a teeeeeny bit better!) and similar spending habits. This is probably both good and bad…especially if you have different habits. For us, using both incomes and both credit scores is our best bet, but if one partner has terrible credit or people spend very differently, staying more separate may be best.
With that decided, we added each other to one account each as an authorized user. The card we’ll primarily use is in his name, and the back up is in mine. If something happens, he’s the only one responsible for the primary card and I’m responsible for the back up. As long as we have similar spending patterns (we do), pay off our bills on time (always) and don’t tend to disagree about money (we don’t) this method should work fine for us. (If not, I would have taken out a new card–that’s one of the biggest problems women in particularly often face when things go wrong–they have no separate finances. While I have no concerns, it also isn’t worth the risk.)
Other articles did mention that we need to make sure we’re on the same page about spending limits, set a threshold for making large purchases (anything over $200 needs to be discussed) and determine who will actually pay the bill. While we kind of had a plan for how much to spend, we still needed to decide what we would ACTUALLY do–joint accounts, separate, savings.
Our first step was to merge our savings accounts (we both had accounts with Ally, and it was actually easier to open a new account and transfer the money), and then I added Shamrock to my checking account. He thinks he still wants to have an individual checking account and I’m pretty sure I don’t care, so this seemed like a good start. He’s started switching over the bills to that account and his paycheck now pays into that account as well. We still need to figure out how to handle individual money (is that a credit card? A checking account? Savings?) but so far its working pretty well for us.
Basically, we have:
- One joint checking account (formerly known as mine)
- Two joint credit cards (formerly two individual cards–one from each of us) Oh, and a Target card (5% heyyy!)
- One joint savings account through Ally
- Miss Clover’s individual savings account
- Miss Clover’s personal credit card
- Shamrock’s individual investment account (which is basically his savings)
- Shamrock’s checking account
- Shamrock’s work card, other semi-work card/could be personal card, several other store accounts (someone still has too many)
- Various individual retirement-related accounts
Eventually I think we may consolidate a bit more, but this is a good start for us. Honestly, we started talking about this 11 months ago–none of it was hard, but there are a lot of logistics and some permanent changes we made. It took us til February to add Shamrock to my checking account, and his first paycheck was deposited into my account last week. Change takes time. I paid my last bill for the mortgage in March; the only thing I pay now is my personal credit card (ok, fine, its on autopay).
How does it feel? Weird. I’ve been the one paying my own bills since college, and both not paying and not being entirely sure what’s happening is different. I trust Shamrock and he does an excellent job, but it was a surprise when he switched the mortgage to pay five days earlier than usual. I no longer know how much money is in an account that used to belong only to me. He uses Quicken and installed the app on my iPad so I can see whenever I want, and checks with me about how to categorize purchases, but the loss of control is a new feeling. Last week I had to send him an email telling him I needed to contribute to my Roth IRA for this year at some point, and I would need the money–we can wait to build up a cushion in our account or transfer some money from savings, but the feeling is still funny.
We still need to get rid of a few more accounts, but so far this is working for us–I apologize for the all-about-me post, but I was really curious about what exactly other people DID when we were figuring this out, so hopefully it helps someone!
How did you combine finances? Anyone else have a shocking/ridiculous number of cards & accounts?!