When To Cosign & Commingle In A Relationship

While my husband and I were dating he asked me if I wanted to be an authorized user on his new credit card.

When I first heard the question. I had to ask him to repeat it. For one, we had only been dating for two years. Secondly, we had never mixed our finances before that day so I was truly shocked by the question. I knew he trusted me, but this was his credit we were talking about.

Thank goodness for him, I am a responsible adult who only charged what I could afford to pay off each month. In fact, we still have that credit card today. But things could have turned out very differently. What if I had chosen to take my new credit card and go on a shopping spree? What if we broke up and I stuck him with the bill?

Hindsight, of course is always 20/20. When I talk to clients today I give very specific advice on when to cosign and commingle finances with their bae. I share that advice here today in hopes it helps you make the best financial decisions in your relationship.

Whose Debt is Whose

Outside of being authorized users on some of each other’s credit cards, my husband and I have no shared debt. In fact, we technically don’t share the credit card debt. When you are an account holder and decide to add an authorized user, you are taking responsibility for their credit card purchases and yours. However, if something was to happen to you--the account holder--the authorized user is not responsible for the bill.

For this reason, my husband and I choose to be authorized users for each other’s credit cards instead of joint credit card holders. In the state where we live, if my husband passed away, I am not responsible for my his credit card debt, but if I was a joint card holder I would be responsible for the bill. Check your state for your rules, but this policy normally applies when it comes to spousal credit card debt.

When to Cosign

My husband and I have never cosigned on each other’s loans, and I recommend all couples handle their debt the same way.

I took out loans for my car and the house where we currently live. While he took out loans for his car and the house he purchased before we got married. Now that we are married, both of our names are on the deeds of the properties but each loan is only on one person’s credit.

If you cannot afford a home without the income of your partner being included, only consider a 15 or 30 year mortgage after you have committed to marriage. Most states have clearly defined laws for how property is divided in the event of divorce. However, the law is not always clear when it comes to couples that are just dating. To protect yourself and your investment, purchase a home with a spouse.

Never cosign anyone’s debt. When you cosign on a loan you are promising the lender that you will make the loan payments if the purchaser stops paying. So as a rule of thumb, you should not cosign on your partner’s car loans, your children’s student loans, or any other friend or family member’s debt.

In fact, before you resort to cosigning, ask the lender what other options the purchaser has to qualify for the loan, apartment, or whatever he or she is applying for. In some cases, a purchaser can put down a greater deposit to secure the loan. Maybe you can contribute cash to that deposit instead of your credit.

If you decide to cosign anyway, make sure you can afford to pay for the loan. If not, don’t do it! Remember, you will be contacted if there is a missed or late payment. Either action, can negatively impact your credit score regardless if you are paying all your other bills on time.  

So, promise yourself to never cosign, and when you get married use one person’s credit not both. Why tie up two people’s credit if you don’t have to? This keeps the other person’s credit available if you need it.

When to Commingle

Now my advice for when to mix your money with your bae’s a bit different. I believe a couple should mix their money once they are in a committed relationship and have common bills.

For me and my husband that was the year of our engagement. We moved in together a year before we got married. We discussed what bills we would split and what bills we each had and planned to pay individually.

If you are going to live together, there are benefits to having a shared bank account for household bills. Yet, it is very important you define the rules before opening accounts with someone who is not your spouse. Make sure each person understands what the community bank account is designated to pay for and which purchases you both need to agree on. For example, we could use our community account for household shopping and bills. But if anyone wanted to spend over $100 of the community money on something for ourselves, we had to agree on the purchase first.

Decide upfront if you are going to deposit your entire paycheck or just the portion you have agreed to pay towards bills. Then be clear how you feel about personal bank accounts. My husband and I agree it’s ok to have personal bank accounts, and we do not hide this from each other. Lack of transparency or hidden bank accounts can tear apart a relationship so be clear about your stance on this issue.

When it comes to paying household bills I recommend you schedule “money dates” to review your budget and your finances. During your “date” make sure all household bills were paid, discuss any unexpected expenses that came up, and review the account transactions for errors or fraud. Even if paying the bills is one person’s normal responsibility, both people should know how and when to pay the bills. This is just in case something happens and the primary bill payer is not able to pay the bills one month or so.

If one person in the relationship has issues with money or credit, work on those issues together. Bring in a professional financial advisor or coach if you need help.

Money can be the reason a couple makes it or breaks up. So make sure to discuss your finances often so you both remain on the same page. When you decide to commingle your money you can learn a lot about a person and what they value most. If something doesn’t sit right with you find a way to talk about it before it becomes an issue that ruins your relationship.