Pros and Cons of Add-On Credit Card

Introduction

Credit cards, issued by card issuers, are now an essential financial tool for people and their families alike in today’s world. They provide comfort, flexibility, and a variety of advantages. The add-on credit card is one such credit card option, which allows you to extend the advantages of your primary credit card to your loved ones. We will discuss the pros and cons of add-on credit cards in this article to help you make an informed decision.

Benefits of Add-On Credit Cards

Joint Credit Limit

You can set a joint credit limit for all the cards linked to your account when you choose an add-on credit card. This feature aids in the management of your overall spending and ensures responsible usage. It can also be used for budgeting because you can attach particular credit limits to each cardholder.

Comfort and Financial Control

Add-On credit cards allow you to give a credit card to a member of your family, such as your wife, children, or parents. This enables them to make purchases or manage their expenses without requiring separate accounts. It aims to simplify financial transactions and eliminates the need to carry cash.

Building Credit History

An add-on credit card can be useful for people who are new to credit or have a limited credit history. Additionally, the primary cardholder can help the add-on cardholder in building or improving their credit score by making timely payments and maintaining a low credit utilization ratio. By doing so, this could make way for better financial opportunities in the future.

Rewards and Benefits

Add-on credit cardholders usually receive the same rewards, cashback, and other benefits as primary credit cardholders. This means that the purchases made by the add-on cardholder can help the primary cardholder earn rewards or cashback. It’s a great way to get the most out of your credit card and make your money work for you.

Drawbacks of Add-On Credit Card

Shared Liability

When you give a family member or a loved one an add-on credit card, you become jointly liable for any debts or amounts spent on that card. If the additional cardholder misuses the card or incurs debt, it can harm your credit score and financial stability. It is essential to establish trust with add-on cardholders and communicate expectations about card usage and responsible spending.

Loss of Control

While add-on credit cards are useful, they also involve the sharing of financial control. You might not have complete visibility into how the add-on cardholder is using the card, which could lead to surprises and disagreements. To avoid financial strain or conflicts, it is important to keep open lines of communication and set up spending guidelines.

Impact on Credit Score

If the add-on cardholder misuses the card, makes late payments, or exceeds the credit limit, both the primary and add-on cardholders' credit scores will suffer. This may make it difficult to obtain loans or credit in the future. Regularly monitoring the transactions and payment activity on the add-on card can help reduce these risks.

Potential Overspending

An add-on credit card may attract the cardholder to spend beyond their means, especially if they are unfamiliar with credit management. It's important to teach the add-on cardholder about responsible credit card usage and encourage them to keep track of their spending. Reviewing credit card statements together regularly can help identify any excessive or unnecessary spending.

Conclusion

Add-on credit cards can be a suitable and helpful way to provide financial assistance to your loved ones. They provide comfort, shared credit limits, and the opportunity to establish credit. However, they do come with shared liability, loss of control, and potential credit score risks. To make the most of add-on credit cards, it is important to provide clear guidelines, maintain open communication, and regularly monitor card activity.