When couples get married the decision to merge your lives together also includes merging your finances. Each couple’s definition of merging finances is different, and how you chose to merge (or not to merge) your finances varies between couples. Some couples choose to open a joint bank account in order to easily manage their monthly couple’s expenses and some couples chose to keep separate bank accounts and contribute equally towards the monthly expenses.
If you and your spouse have similar incomes, contributing equally towards your monthly couples expenses may imply that each person contributes the exact same dollar amount towards your couple’s expenses each month. However, if you and your spouse do not earn the same (or approximate) monthly income, then contributing equally to your couples expenses may imply that each person contributes a percentage of their income towards the monthly expenses based on what they can afford.
If you and your spouse each contribute a percentage of your income towards your monthly couple’s expenses, the percentage that you are able to contribute depends on what you can afford. How much you can afford depends on how much income you earn each month, and it also depends on your current debt obligations.
Many couples get married and merge their finances without realising the consequences of having joint debts, co-signing for debts, and having a secondary card holder on your credit card. Before you sign with your spouse for a mortgage, a personal loan or a credit card, it is important to know how merging your finances, especially your credit products, affects your personal credit score.
What’s the difference?
Joint Credit Applications. A joint credit card (or any credit product) means that both people are jointly responsible for the entire debt. It also means that each person can be solely responsible to repay the entire debt by themselves. Therefore if you have joint credit products and your spouse looses their income, you can be solely responsible to repay the debt in full.
Co-signing. A consignor is required when the original credit applicant is not approved. A co-signer is not an owner of the account (i.e. if it is a credit card they do not have a physical credit card) but they are still responsible to repay the debt if the original applicant fails to pay. By co-signing a credit application with your spouse, you do not get the benefits of the credit product, but you are responsible for the debt repayment in the event that your spouse fails to repay the debt.
Secondary Cardholders. A secondary cardholder is the exact opposite of a co-signer. A secondary cardholder is not an owner on the account and they are not responsible to repay the debt, but they do enjoy the benefits of the credit product. If you chose to give a secondary credit card to your spouse, they will have the ability to spend money, but they are not responsible or liable for the debt.