There may be no greater misconception in the financial world than the notion that “anyone” can get a credit card. Getting approved for a traditional credit card is no sure thing. In fact, a recent study by the Consumer Financial Protection Bureau found the approval rate for general-purpose credit cards to be less than 40%.
All of which means many borrowers, particularly those who are routinely denied new credit, need another way to access credit if they want to build or improve their credit history. Finding a reliable co-signer is one option. The concept is simple. If you can’t get approved for a traditional credit card on your own, you find a co-signer with a stronger credit profile who is willing to agree (in writing) to bear full responsibility for the card’s balance should you not pay, thus easing the lender’s concerns.
Joint accounts work much the same way, but there’s a big difference: joint account holders have charging privileges, meaning they can use the card as they want, whereas co-signers usually do not. At the end of the day, whether someone is a co-signer or a joint account holder, they’re every bit as liable as you for any outstanding debt on the card and, for better or worse, the resulting impact on their credit history.
Banks That Accept Co-signers
Among the major credit card providers, only a few, such as Bank of America and U.S. Bank, allow for joint or co-signed accounts, while most others, such as American Express, Capital One, Chase, Citi, and Discover, do not.
Should You Ask Someone to Co-sign Your Credit Card?
According to most credit experts, however, it’s not really a question of can you get a co-signed credit card, but rather, should you?
The answer, according to those same experts, is virtually unanimous.
Experts Agree: Avoid Co-signed Credit Cards
“Few people realize what they’re asking when they ask someone to co-sign,” says Ben Woolsey, president and general manager of CreditCardForum. “They think the bank just needs someone as a credit reference. It’s way beyond that, and something that’s never really a good idea.”
Among the many drawbacks to pursuing a co-signed or joint account is the significant risk you’re asking that co-signer to accept, according to Michelle Black, a credit expert with HOPE4USA, an organization that specializes in helping consumers and businesses repair and access credit. Ultimately, the co-signer has nothing to gain and everything to lose. If you fall behind on payments, they must either pick up the slack or see their own credit dragged down by your failure to stay current.
“Co-signing is like playing Russian roulette with your credit scores,” says Black. “It’s extremely dangerous and typically ends badly.”
The fact that all of the risk associated with a co-signed credit card generally falls on the shoulder of the co-signer often creates challenges that go beyond the financial realm, according to Woolsey.
“It’s something people should approach carefully with respect to the ethical position you’re putting someone in,” Woolsey says. “Aside from the financial risk, there’s also the dynamic of potentially hurting the personal relationship, and that’s something people don’t really think about.”
Fortunately, there are many alternatives to co-signed credit cards, most of which are equally effective at providing access to credit and building your overall credit profile, without the financial and moral hazards.
Alternatives to Getting a Co-signed Credit Card
Become an authorized user on someone else’s account
One of the best alternatives to a co-signed credit card is to have someone add you as an authorized user to an already existing account, says Woolsey.
“It gives you all the benefits of getting a card in your own name, but it gives the primary account holder the control they don’t have as a co-signer, because they can revoke that privilege any time they want,” he says.
Whereas only some of the aforementioned credit card companies allow for co-signed credit cards, all allow for the addition of authorized users to an account.
Get a secured credit card
If you’re strictly looking to build or improve your credit, the secured credit card is another alternative. With a secured credit card, you put down a cash deposit that in turn becomes the line of credit for your account. If you put down a $1,000 deposit, you have $1,000 against which to spend and build credit. As you make “payments” on your secured card over a set period of time (usually 6 to 12 months), the lender will report your good behavior to credit bureaus. Some lenders may even upgrade you to a traditional credit card once you’ve proven you can make on-time payments.
Most major credit card companies offer secured credit cards, as do most credit unions.
“Secured cards can be a wonderful credit-building tool when managed responsibly,” says Black.
Take out a personal loan
If you’re looking to build your credit profile while also gaining access to cash, a personal loan is another option to consider, says Tim Hong, SVP of Products at MoneyLion.
“When you agree to a personal loan, you get your funds upfront and have a steady, predictable payment schedule,” Hong says. “You know exactly how much it will cost over time and when you’ll be done. That’s a dramatically different and more predictable experience than a credit card.”
Apply for retail credit cards
Finally, borrowers needing to build their credit profile can always fall back on the old-fashioned store credit card. Though not everyone is a proponent of store credit cards, most such cards, especially those from retailers, tend to have a lower barrier to entry than standard credit cards, says Ryan Frailich, a financial coach and planner based in New Orleans, La.
“Of course, since they’re taking on more risk by approving cards for those without a great track record, they also have the highest interest rates,” says Frailich. “If you go this route, you have to be absolutely certain you can pay off the full balance monthly.”
The Bottom Line
Whether you find a co-signer for your credit card or pursue one of the many alternatives, the experts agree your primary focus should be on building your credit to the point where banks will approve you on your own.
“What it boils down to is that co-signing is really just one option amongst many,” says Hong. “In the big picture, it’s about showing that reliable payment history and improving your credit score so you avoid having the need for the co-signed card to begin with.”
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