Add-on credit cards can have both positive and negative implications for your finances, depending on how they’re used and managed. Positively, add-on credit cards can be convenient for family members or dependents. They allow individuals to extend the benefits of their primary credit card to their spouse, children, or parents. It helps in building a credit history for those who are new to credit or have limited access to financial instruments.
However, add-on cards can pose risks if not managed responsibly. Since the primary cardholder is responsible for payments, any misuse or overspending by the add-on cardholder reflects on the primary holder’s credit score and financial health. If the add-on card user defaults on payments or accumulates debt, it can affect the primary cardholder’s creditworthiness and financial stability.
Convenience
An add-on card can be a convenient way to provide your spouse, children, or parents with access to credit without requiring them to meet individual eligibility criteria. This can be helpful for managing household expenses, emergencies, or building their credit history.
Shared Benefits
Some credit cards offer you added benefits when you use add-on credit cards. Higher spendings would mean higher reward points. Add-on cards often come with the same benefits and reward programs as the primary card, allowing secondary users to enjoy cashback, discounts, points, and other perks.
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Enhanced Credit Limit
Depending on the bank and card, adding a secondary user can sometimes increase your overall credit limit, though this can be a double-edged sword if not managed responsibly. You can get higher amount at your disposal, but it is recommended to keep a track.
Track Spending
As the primary cardholder, you have access to the spending details of the add-on card, allowing you to monitor spending and set spending limits if needed. You can also check the expenses to avoid misuse of add-ons credit limit.
Credit Score
The primary cardholder is responsible for all charges on the add-on card. Late payments or defaults by the secondary user can negatively impact your credit score and lead to financial penalties. Your credit health is very important to be eligible for the most of financial products.
Adhil Shetty, CEO, Bankbazaar.com, says, “Assess the financial habits and discipline of the intended user before extending this privilege. With proper management, add-on cards can streamline expenses and offer convenience, yet they necessitate vigilance to prevent overspending and potential risks to your credit health.”
Overspending
Easy access to credit can lead to overspending for both the primary and secondary users. This can be especially risky if the secondary user lacks financial discipline.
Annual fees
Before applying for add-on credit card, you must check what are the additional charges both one time and regular. Some banks charge additional annual fees for add-on cards, which can add to your overall credit card expenses.
Potential Misuse
If the add-on card falls into the wrong hands, it can be misused for fraudulent activities or irresponsible spending. Overall, add-on credit cards can be a useful tool, but they require careful consideration and responsible management. If you are disciplined and choose a creditworthy secondary user, they can offer convenience and benefits. However, if you have concerns about overspending or misuse, it’s best to avoid them.
What is recommended is that you must know how to responsibly use your credit card for maintaining good financial health. Always weigh the pros and cons carefully before applying for an add-on card and explain the same to the person who will use it.