For people who have limited credit history or have had financial difficulties in the past, it can be frustrating to apply for a credit card. Many of the large banks and major credit card companies won’t make exceptions for hardship or circumstances.
The solution for some people is to ask a friend or family member to cosign your credit card application. A credit card with cosigner might not seem like an ideal solution at first, but it’s important to consider both the pros and the cons before you make a decision about applying for one.
With that in mind, let’s review the pros and cons of credit cards with cosigners so you can make an informed decision.
The Pros of a Credit Card with Cosigner
First, if you can’t qualify for a credit card on your own, getting someone to cosign is probably the only way you can get a card. The cosigner accepts responsibility for the debt, making the credit card issuer comfortable with the idea of extending credit to you. They are allowing you to use their credit to help you qualify. That’s an advantage since it can make the difference between getting credit and having no credit.
Second, having a cosigner on your credit card gives you an opportunity to build your credit in a responsible way. These days, it’s very hard to build up a good credit history without a credit card. If you pay in cash or use a debit card, your payments won’t be recorded. You might do a great job of managing your money and have nothing to show for it. With a cosigner on your credit card, you’ll have the chance to work toward being able to qualify for a card on your own merit.
Another pro of getting a credit card with a cosigner is that you can qualify for a more favorable interest rate than you would be able to get on your own. Sometimes, you can qualify for a card with a high rate. However, the rate might be so high that having it isn’t advantageous to you. When you add a cosigner, you may be able to get the kind of rate that’s reserved for people with good or excellent credit, thus saving money in the long run.
Fourth and finally, having a cosigner on your credit card can give you some peace of mind if you lose your job or run into difficulties. The person who cosigns your account is responsible for any debt you incur, and they’ll have to pay it if you can’t.
As you can see, there are some advantages to getting a credit card with a cosigner.
The Cons of a Credit Card with Cosigner
Now, let’s examine the flip side of the coin. While there are some real pluses to having someone cosign your credit card, there are some potential downsides too – for both you and the cosigner.
First, the person who cosigns your credit card is linking their credit to yours. That can be a good thing if you pay your bill on time every month, since their credit score might tick upward in response. However, if you’re late or run into difficulty, it can adversely affect their score over time. It’s easy to see why this might be a disadvantage.
Another potential downside to having someone cosign your credit card is that it can impact your relationship with the cosigner. If you’re late with your payments or do anything that might jeopardize their credit, you should be prepared for them to be upset with you. Money is a common cause of disagreements in relationships, and having someone cosign your credit card can be an issue in the relationship if you’re not careful.
On a related note, it’s important to remember that the person who cosigns your credit card is accepting financial responsibility for your debts. That can be an advantage for you, but it can also be a big disadvantage for them. If you default, they’ll have to pay up or risk hurting their own credit. It’s important to keep the potential harm you could do in mind before you agree to let someone cosign your card.
Finally, it’s possible that the cosigner may feel that they have the right to offer advice or ask intrusive questions in return for having cosigned your card. In some cases, getting unsolicited advice might not seem to be a problem. But imagine how you’d feel if you were out with your cosigner and made a purchase using the card, and they made rude or unkind remarks about your spending habits.
The bottom line is that getting a credit card with a cosigner can be beneficial. Provided you have a strong relationship with the cosigner and are willing to keep the lines of communication open, it can be a good way to build your credit.
If you have any more questions, feel free to contact your local branch to speak with our experienced team.