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Has your soon-to-be college student chosen the school they’d like to attend in the fall? Or, are they just starting to think about the application process? Either way, it’s never too early to research ways to pay for college.

Student loans, federal and private, are one common method that students and their families use to cover the cost of higher education. Typically, students are the ones who take out these loans (and are responsible for repaying them). However, there are also student loans, both federal and private, available for parents.

Also keep in mind that if your child takes out a private student loan, you will likely need to act as a cosigner, which means you will be responsible for repayment if your child is unable to make payments.

No matter who acts as borrower, it’s important for parents to be in the loop when it comes to student loans. Here’s what you need to know.

Not All Loans Are Created Equally

When it comes to student loans, there are two main options:

•   Federal loans (funded by the federal government)

•   Private student loans (funded by private lenders)

Federal Student Loans

Federal student loans are provided by the U.S. Department of Education and come in several forms:

•   Direct Subsidized Loans These are for undergraduate students and are awarded based on financial need. The government pays the interest on these loans while the student is in school and for six months after they graduate (known as the grace period).

•   Direct Unsubsidized Loans These are available to undergraduates, graduate students, and professional students and are not awarded based on need. The borrower is responsible for paying all interest that accrues on the loan.

•   Direct PLUS Loans These are for graduate and professional students and parents of dependent undergraduates. They are not based on financial need and a credit check is required.

•   Direct Consolidation Loans This option allows you to combine all your federal loans into one loan payment under a single loan servicer.

All federal loans come with fixed interest rates, which means the rate won’t change over the life of the loan. Interest rates are set by Congress each year on July 1st. For most students, federal loan repayment starts after the post-graduation grace period.

To apply for federal student loans, you need to submit the Free Application for Federal Student Aid (FAFSA).


💡 Quick Tip: Make no payments on SoFi private student loans for six months after graduation.

Private Student Loans

Private student loans are available through banks, credit unions, and online lenders. Many private student loans mirror the terms and repayment periods of federal student loans, but not always. Differences between federal versus private loans include:

•   Credit checks Most federal student loans don’t require a credit check (except PLUS loans) but it’s required for private student loans. To qualify for a private student loan, you’ll need to meet the lender’s credit and other eligibility requirements.

•   Repayment start date Some lenders might allow you to defer making payments until six months after you graduate, while others may require you to begin repayment while you’re still in school.

•   Interest rates Federal student loans have fixed interest rates that don’t change over the life of the loan; private student loans offer fixed or variable interest rates.

•   Repayment terms Federal loans have long repayment terms — from 10 to 30 years, depending on your plan. Private student loans also vary in term length, but might not be as long.

•   Loan forgiveness Some federal student loans offer forgiveness options for certain career paths, or after you’ve made a certain number of payments on an income-driven repayment plan. Private student loans aren’t required to offer this option to borrowers.

How Parents Can Help

If your student has tapped all available financial aid, including federal student loans, you might look into student loans for parents.

The federal government offers Direct PLUS Loans for parents. They have higher interest rates and fees and qualify for fewer repayment plans than federal direct subsidized and unsubsidized loans for students. The interest rate for federal direct PLUS loans is 8.05% for the 2023-24 academic year. There is also an origination fee of 4.228%, which is deducted from each loan disbursement.

To get a PLUS loan, you can’t have an adverse credit history (there may be exceptions to this rule if you meet other eligibility requirements) and you must complete the FAFSA with your child.

It’s important to note that a parent PLUS Loan will ultimately be your responsibility to repay. The only way to transfer parent loans is to have your child refinance the loan with a private lender in their name.

You also have the option of getting a parent student loan through a private lender, such as a bank or credit union.

If you have solid finances and expect to be able to work the entirety of your loan term, a private student loan may be a better deal. Private student loans often offer lower interest rates and typically don’t have origination fees. However, they generally don’t offer as many protections should you lose your income and have trouble repaying the loan.

You Can Use Loan Money Only for Certain Things

Typically, student loans are paid out directly to the school. The school will then apply your loan money to tuition, fees, and room and board (if your student lives on campus), and give any remainder to your student. They can then use the surplus funds but only for education-related expenses. This includes textbooks, computers/software, transportation to and from school, housing, meal plans or groceries, and housing supplies (e.g., sheets, towels, etc.).

Students can’t, however, use the proceeds of a student loan to pay for entertainment, going out to dinner, takeout meals, clothing, or vacations.

Federal Loans Offer More Forgiveness Options

Some student loan repayment plans, like income-driven plans, give graduates the opportunity to have their loans forgiven if they aren’t fully repaid at the end of the repayment period, which may be 20 or 25 years.

Depending on the field of work your student may enter, there may be other forgiveness options. For example, under Public Service Loan Forgiveness (PSLF), borrowers can have their loans forgiven after 120 monthly loan payments. To qualify, you must work for an eligible non-profit organization or government agency full-time while making those qualifying payments.

With the Teacher Loan Forgiveness Program, borrowers can qualify for up to $17,500 in loan forgiveness if they teach full-time for five full and consecutive academic years in a low-income elementary or secondary school or educational agency.

There are far fewer student loan forgiveness programs available for private student loans than federal loans. However, some private lenders offer loan modification or repayment assistance programs.


💡 Quick Tip: Would-be borrowers will want to understand the different types of student loans that are available: private student loans, federal Direct Subsidized and Unsubsidized loans, Direct PLUS loans, and more.

The Takeaway

You and your student will generally only want to look into student loans after you’ve tapped more cost-effective forms of funding, such as scholarships, fellowships, and grants — since that’s money you don’t have to pay back.

After that, you might consider federal student loans. You don’t need a credit history to qualify, and they come with low interest rates and programs, like income-driven repayment plans and loan forgiveness, that private loans don’t offer. If you still have gaps in funding, you might next look at private student loans.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

About the author

Julia Califano

Julia Califano is an award-winning journalist who covers banking, small business, personal loans, student loans, and other money issues for SoFi. She has over 20 years of experience writing about personal finance and lifestyle topics. Read full bio.

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Short-term financial goals are generally things you want to achieve within one to three years. They can be “one and done” in nature (say, “Save enough money for a Caribbean vacation”), or they might be incremental steps to much larger financial goals, such as beginning to save for a child’s college tuition).

Setting financial goals can be an important step toward achieving them. After all, it’s probably not enough to simply hope your dreams become reality. Making a plan can significantly increase the likelihood that you’ll meet the goal. It will focus you on what you want to attain and help guide you toward getting there.

Here are some common short-term financial goals you may want to adopt plus intel on how to achieve them.

What Are Short-Term Financial Goals?

Short-term financial goals are typically objectives you want to attain within the next couple of years, unlike long-term financial goals (retirement, paying off a mortgage). Some examples of short-term financial goals include:

•   Paying off credit card debt

•   Saving for a vacation

•   Saving for a wedding

•   Stashing away money in an emergency fund.

Of course, goals will vary with your unique situation and . You might be totally focused on getting together enough money for the down payment on a new car, while your best friend might want to pay off their $10K in credit card debt.

6 Short-Term Financial Goals

Take a closer look at some of the most common short-term financial goals.

1. Build an Emergency Fund

Often, a short-term financial goal involves saving for an emergency fund. This kind of fund usually contains enough cash to cover three to six months’ (or more in some cases) worth of living expenses. The idea is that, just in case something unexpected comes up — such as job loss or a major car repair — you can afford your bills without resorting to high-interest forms of funding, such as credit cards.

Not only can an emergency fund keep you out of debt, it can provide peace of mind. Knowing that it’s in place and that it’s growing can be an important form of financial security. Some tips:

•   You can build an emergency fund by putting some money towards it every month. Consider setting up a recurring automatic transfer to send whatever you can spare (even $20 per paycheck) to the fund.

•   It can be wise to set up a separate savings account for your emergency fund so you won’t be tempted to spend it. Look for a high-yield savings account to help your money grow faster.

•   To build your emergency fund more quickly, funnel a large payment, such as tax refund or bonus, right into this account. A money windfall can really help plump up your savings.

💡 Learn how much you should save for emergencies by using our Emergency Fund Calculator.

2. Make a Budget

Getting a sense of how much you are actually earning, spending, and saving each month is a critical step in working towards both short-term and long-term financial goals.

You can do this by tracking your income and expenses for a couple of months, to see what is flowing into and out of your checking account.

This will help you make a budget that helps keep your finances on track to meet your daily expenses and short-term savings goals. A few ways to accomplish this:

•   Review and test-drive a couple of budgeting techniques. One popular method is the 50/30/20 budget rule, which can guide you to put 50% of your take-home pay towards needs, 30% toward wants, and 20% toward saving. See if one type of budget clicks for you.

•   You might use a budgeting app to help you connect your accounts, categorize where your money is going, and see at a glance how you are progressing toward your short-term financial goals. A good place to start: See what kinds of financial insights tools your bank provides. You may find just what you are looking for.

•   Consider third-party budgeting apps. You might search online or ask trusted friends if they are using one that they would recommend.

Once you see where your money is actually going, you may discover some surprises (such as $200 a month on lunches out) and also find places where you can easily cut back. You might decide to bring lunch from home a few more days per week, for example. Or you might want to cut back on streaming services or ditch the gym membership and work out at home.

This money you free up can then be redirected towards your savings goals, like creating an emergency fund, buying a house, or funding your retirement.

3. Pay Down Credit Card Debt

Another important financial goal example is paying down credit card debt. If you carry a balance, you may want to make paying it off one of your top short-term financial goals. The reason: Credit card debt is typically high-interest debt. The average annual percentage rate, or APR, charged by credit cards was above 20% in mid-2024, according to the Federal Reserve Bank of St. Louis. That means that items you buy with a credit card could potentially cost you a hefty amount more than if you pay with cash.

What’s more, because the interest on credit card debt can be so costly, it can make achieving any other financial goals much more difficult. Here’s how you might work toward paying off your credit card debt:

•   You could try the debt avalanche method, which involves paying the minimum on all but your highest-rate debt. You then put all available extra funds toward the card with the highest interest debt. When that one is paid off, you would roll the extra payment to the card with the next-highest interest rate, and so on. By knocking out your highest-interest debt first, you may be able to save a chunk of money.

•   Another option for paying off debt is the debt snowball method. With this technique, you pay the minimum on all cards, but use extra money to pay off the debt with the smallest balance. When that’s paid off, you move to the next smallest debt and so on. This can give you a sense of accomplishment as you get rid of debt which in turn can help keep you motivated.

•   You might consider consolidating your debt by taking out a personal loan to pay off all of your cards. These usually offer a lump sum of cash to be paid off in two to seven years at a lower interest rate than credit cards. Having only one payment each month can help simplify the payoff process.

If you feel your debt burden is too great to be resolved with these options, you might want to speak to a certified credit counselor for advice.

4. Pay Off Student Loans

Student loans can be a drag on your monthly budget. Paying down student loans, and eventually getting rid of these loans, can free up cash that will make it easier to save for retirement and other goals.

One strategy that might help is refinancing your student loans into a new loan with a lower interest rate. You can check your balances and interest rates across your federal and private loans, and then plug them into a student loan refinancing calculator to see if refinancing offers an advantage.

Keep in mind, however, that if you refinance federal student loans with a private loan, you will lose access to such benefits as deferment and forgiveness. Also, if you refinance your loans into one with a longer term, you could wind up paying more in interest over the life of the loan.

Also note that not all refinancing options are created equal. There are bad actors out there who might promise to get rid of all your debt but will only damage your credit score. If you do refinance your student loans, you’ll want to make sure you’re working with a reputable lender.

5. Focus on Your Retirement Fund

Yes, saving for retirement is typically a long-term goal, but if you’re not yet saving for retirement, a great short-term financial goal may be to start doing so. Or, if you’re putting in very little each month, you may want to work on upping the amount. Here are a couple of specific ideas:

•   If your employer offers a 401(k) and gives matching funds, for example, it’s normally wise to contribute at least up to your employer’s match. You can then start increasing your contributions bit by bit each year.

•   If you don’t have access to a 401(k), consider an individual retirement account, or IRA. You may be able to set up an IRA online and start funding your retirement there. (Keep in mind that there are limits to how much you can contribute to a retirement plan per year that will depend on your age and other factors.)

While retirement is a long-term vs. short-term financial goal, taking advantage of this savings vehicle can reduce your taxes starting this year. Here’s why: Money you put into a retirement fund likely offers tax advantages, such as lowering your taxable income.

Even more importantly, starting early can pay off dramatically down the line. Thanks to the power of compounding returns (when the money you invest earns returns, and that then gets reinvested and earns returns as well), monthly contributions to a retirement fund can net significant gains over time.

6. Begin to Build Wealth

If you already have an emergency fund, you may want to start thinking about what you are hoping to buy or achieve within the next several years, and also building your wealth in general. As you save money, think about where to keep it to help it grow. The power of compounding returns, as mentioned above, or compounding interest in the case of a bank account, can really help in this pursuit.

•   For financial goals you want to reach in the next few months or years, consider putting this money in an online bank account that offers a high interest rate vs. a traditional savings account, but allows access when you need it. Options may include a HYSA (high-yield savings account, often found at online banks) or a money market account.

•   For longer-term savings, you may want to look into opening a brokerage account. This is an investment account that allows you to buy and sell investments like stocks, bonds, and mutual funds. A taxable brokerage account does not offer the same tax incentives as a 401(k) or an IRA, but it is probably much more flexible in terms of when the money can be accessed.

Just keep in mind that there’s risk here: These funds will not be insured as accounts at a bank or credit union usually are. Bank or credit union accounts are typically insured by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA) up to $250,000 per depositor, per account ownership category, per insured institution.

How Do You Create a Short-Term Financial Goal?

To create a short-term financial goal, identify what you want and how much money you need. Then, looking at your budget and seeing what cash you have available, see how long it will take to save up enough money. For instance, if you want to have $2,400 in a travel fund a year from now, you will need to put $200 a month aside. Check your cash flow and see where you can free up funds (maybe reduce takeout food and fancy coffees, for starters) to meet this goal.

How to Set SMART Financial Goals

In addition to the short-term financial goals examples and guidance above, there’s another way to think about this topic: using the acronym S.M.A.R.T. This system can help you both with identifying and achieving your goals. Here’s what this stands for and how considering your financial aspirations through this lens can be helpful:

•   Specific: A goal should identify exactly what you are saving for, whether that’s paying off credit-card debt or buying a used car.

•   Measurable: How much is your goal? How much do you need to save? Perhaps your credit card balance is $5,673. That would be your measurable goal.

•   Attainable: Make sure your goal is realistic (you may not be able to pay off your entire credit card debt in a month or even a few months) and develop strategies to achieve it, such as working on alternate Saturdays to bring in more money (a benefit of a side hustle).

•   Relevant: Check that your goal really matters to you and isn’t just something you’re doing to, say, keep up with your friend group. Do you really need to save towards a potentially budget-busting vacation?

•   Time-bound: Set “by when” dates for your goals. This helps to keep you accountable. If you want to save $3,600 for an emergency fund within a year, figure out how you will come up with the $300 per month to put aside.

Using the SMART method can help you crystallize and achieve your short-term financial goals.

Difference Between Short-Term and Long-Term Financial Goals

In discussing short-term financial goals, it’s likely that you might wonder how these differ from long-term goals. Here are a few examples that can help clarify the aspirations above from those that require a longer timeline.

Examples of Long-Term Goals

•   Save for retirement

•   Pay off a mortgage

•   Buy a second home or investment property

•   Save for a child’s (or grandchild’s) college education

•   Fund a business idea

•   Take out life insurance and/or long-term care policies

Of course, long-term goals will vary from person to person. One individual might be focused on being able to retire at age 50 while another might aspire to make a significant charitable contribution.

The Takeaway

Short-term financial goals are the things you want to do with your money within the next few years. Some typical (and important) short-term goals include setting a budget, starting an emergency fund, and paying off debt. In addition, opening a retirement account and otherwise building wealth can be valuable goals, too.

Having the right banking partner can help you reach your near-term money goals. See what SoFi offers.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

About the author

Julia Califano

Julia Califano is an award-winning journalist who covers banking, small business, personal loans, student loans, and other money issues for SoFi. She has over 20 years of experience writing about personal finance and lifestyle topics. Read full bio.

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College is a transformative phase of life filled with opportunities, challenges, and self-discovery. But between classes, social activities, and newfound independence, college can also be an overwhelming experience. There are numerous opportunities to better yourself, but where do you start?

To get the most out of your time in school, it can be helpful to set and achieve some specific goals. These goals can serve as guideposts, providing direction, motivation, and a sense of purpose during your college years. And, your goals don’t have to be all centered around academics — they can encompass personal development, financial stability, and preparing for the professional world.

Read to learn about the importance of setting goals in college, types of goals to consider, and how to set yourself up for success with S.M.A.R.T. goals.

Good Goals to Complete in College

Setting goals in college can help you identify what you want to achieve academically, personally, and financially, providing a roadmap to follow. Whether you’re just starting school or have a few semesters under your belt, here are some goals you might consider.

Academic Goals to Achieve

Earning a good GPA: At the top of many students’ minds is getting top grades. There are plenty of positives to achieving a high GPA, including more potential for scholarships or landing on the dean’s list. It might be a great resume-builder, too. You could aim for a certain GPA, or work on improving your number from last semester.

Increasing professor facetime: Along with earning good grades, actually making an effort to get to know your professors could go a long way. Using your instructors’ office hours to clarify confusing topics might help you understand class concepts better. And who knows, their references might lead you to a really cool internship down the road.

Completing challenging courses: Rather than choosing the path of least resistance, you might aim to conquer challenging courses that align with your academic interests and career aspirations.

Recommended: The Ultimate Guide to Studying in College

Financial Goals to Set in College

Paying for college: There are all kinds of ways to cover the cost of college, including scholarships, grants, work-study, federal student loans, and private student loans. You’ll want to find the best combination, plus look for ways to save money in college.

Setting up a budget: Establishing a budget might seem pointless when you have little money to work with, but learning how to set up and stick with a simple spending plan can serve you well during your lean college years — and beyond.

Finding an internship: A key objective in college is to get a degree so you can get a great job in your chosen field. One great way to set yourself up for a job that pays well after you graduate is to land an internship related to your major.


💡 Quick Tip: Some lenders help you pay down your student loans sooner with reward points you earn along the way.

Personal Goals to Set in College

Signing up for extracurricular activities: College can be a great time to discover new interests. Curious to learn Japanese? There might be a club for that. Want to blow off some steam on a basketball court? There could be an intramural team for that. You could check with your college’s campus life department to see what’s available.

Improving communication skills: Consider engaging in activities that help develop communication skills, such as public speaking or writing for publications. No matter what your major, these are skills that can take you far in your career and life.

Exploring a new country: Whether you choose to spend a semester in Rome or Rio de Janeiro, studying abroad in college can do more than give you a change of scenery. It can provide the opportunity to expand your cultural views and learn more about people across the world.

Should You Set More Than One Goal in College?

It’s not only okay, but recommended to set more than one goal in college. Pursuing diverse goals allows for a well-rounded college experience and personal development. However, it’s crucial to strike a balance between ambition and feasibility. Setting too many goals simultaneously might become overwhelming and lead to decreased effectiveness in achieving any one of them.

The key to setting — and achieving — multiple goals in college is to:

•   Prioritize It’s important to identify the most crucial goals and allocate more time and resources to them.

•   Break goals into manageable tasks You’ll want to divide larger goals into smaller, actionable steps to avoid feeling overwhelmed.

•   Manage your time Try to manage your time efficiently by creating schedules and allocating specific time blocks for each goal.

What Is a SMART Goal?

S.M.A.R.T. is an acronym that provides a framework for creating well-defined goals. This acronym stands for Specific, Measurable, Achievable, Relevant, and Time-bound. Here’s a breakdown of each component:

•   Specific Goals should be clear and precise, answering the questions of what, why, and how. Specific goals provide a clear focus, avoiding ambiguity.

•   Measurable Goals should have quantifiable criteria for tracking progress and determining when they’ve been achieved. This helps in monitoring advancement and staying motivated.

•   Achievable Goals should be realistic and attainable within your capabilities and resources. They should challenge you but remain within the realm of possibility.

•   Relevant Goals should align with your values, aspirations, and long-term objectives. Ensure that pursuing a goal contributes meaningfully to your overall vision.

•   Time-bound Goals should have a deadline or a timeframe for completion. Setting a timeframe creates urgency and helps in planning and prioritization.

SMART Goal Example for Students

If you really want to get down to business on your goals in college, you could use the S.M.A.R.T criteria to start building them out. For example, what if you’re a commuter student who wants to be more involved on campus? The goal of “being more involved” by itself would not fit the S.M.A.R.T. criteria—it’s too vague.

To be more specific, you could re-word your goal by stating, “I want to join two campus organizations this semester and be on the leadership team for one of them.” In this way, you have specifically called out your goal.

It’s also measurable because the goal requires joining two organizations and serving on the leadership team for one. The goal is attainable because you have access to campus organizations. And, it’s relevant to your college experience.

Then you could break down your S.M.A.R.T. goal into mini-milestones. Going along with this example, you might make a goal to check out the activities fair during school. You could also research campus organizations online and narrow your list down to the two you want to become involved with the most.

Another S.M.A.R.T. goal example for students could be paying for college. Breaking it down using the S.M.A.R.T. criteria, for example, could look something like this:

Specific: I need to come up with $10,000 for college tuition by next year.
Measurable: I can measure this by figuring out how much money I have and how much I need.
Attainable: I can achieve this because there are a variety of resources I can use to help me pay for college.
Relevant: The total amount needed is the same cost as one year of tuition at my school. This will help me continue going to school to get my degree.
Time-bound: This needs to be completed in 12 months so I can deliver the funds to the financial aid office.

💡 Quick Tip: Would-be borrowers will want to understand the different types of student loans that are available: private student loans, federal Direct Subsidized and Unsubsidized loans, Direct PLUS loans, and more.

The Takeaway

Setting goals in college can be pivotal for personal, academic, and financial development and success. By adopting the S.M.A.R.T. goal framework, you can effectively plan and pursue objectives that lead to a fulfilling college experience and pave the way for a successful future beyond your college years.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

About the author

Julia Califano

Julia Califano is an award-winning journalist who covers banking, small business, personal loans, student loans, and other money issues for SoFi. She has over 20 years of experience writing about personal finance and lifestyle topics. Read full bio.

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Being a joint account holder and an authorized user are two different ways that two people can share the same account. However, there are a few important differences that you’ll want to be aware of.

When you add an authorized user to your account, the authorized user can benefit from the good credit and payment history on your account but is not responsible for the debt. With a joint credit card account, however, both people apply at the same time and are then legally responsible for all purchases and debt on the account, regardless of which person actually makes the purchase.

What Is a Credit Card Authorized User?

An authorized user on a credit card, sometimes called a user of a supplementary credit card, is an additional person who is added to the account of the primary cardholder. The authorized user gets their own physical card and can make purchases. The authorized user may benefit from the good credit or a positive payment history on the account; it could help them establish or build their credit. However, they are not responsible for any of the purchases or debt.

How an Authorized User Impacts Your Credit

There are many factors that affect credit scores, but adding an authorized user to your account is not one of them. If you add an authorized user to your account, your credit will not be checked, and there should be no immediate impact on your credit. You will want to keep in mind, however, that you are responsible for any purchases made by authorized users. So if your authorized user spends more than you anticipate and you have trouble making the full monthly payment, it could negatively impact your credit score.

Recommended: Understanding Purchase Interest Charges on Credit Cards

Things to Consider When Adding an Authorized User to Your Account

There are many different types of credit cards out there. Here’s a quick look at some things to consider when adding an authorized user to your account, regardless of the card’s specific features:

Recommended: How Many Credit Cards Should I Have?

What Is a Joint Credit Card Account Holder?

Unlike adding an authorized user to your account, you will typically obtain a joint credit card by applying for one with another person. With a joint credit card, the credit of both prospective cardholders is evaluated and used to determine eligibility. If approved, both cardholders are equally and separately liable for all of the debts and purchases on the account, regardless of who actually made the purchase.

It’s worth noting that joint credit cards are becoming less common, and it may therefore be challenging to find one.

How a Joint Account Impacts Your Credit

When you apply for a joint account, the credit of both people is reviewed, and then the applicants are possibly approved to receive a card. This will generally show up on each potential account holder’s credit report as a new inquiry, which may temporarily lower each person’s credit score by a few points.

Additionally, both joint cardholders are responsible for all of the debt, regardless of who actually uses the credit card. So if one person spends more than expected or has trouble paying the bill on time, it may negatively impact both cardholders’ credit scores.

Things to Consider Before Opening a Joint Credit Card Account

Here’s a quick look at some things to keep in mind before opening a joint credit card account:

Joint Credit Card Account Holder vs Authorized User

Consider the differences between these two arrangements:

•   A joint credit card account is one where two people jointly open and use the account, with both people equally responsible for all of the debt.

•   An authorized user vs. a joint credit card has a key difference: The authorized user is not liable for any purchases they might make — instead the primary cardholder is responsible for all charges.

•   Being an authorized user may be one way to help establish or build your credit if the primary cardholder already has good credit and continues to use the account responsibly.

Recommended: What Is the Minimum Age to Be an Authorized User on a Credit Card?

Choosing the Right Option

A joint credit card account typically only makes sense for two people that are in a committed relationship in which they are already sharing their finances. And you will also want to keep in mind that many major credit card issuers do not offer joint credit card accounts.

An authorized user, on the other hand, can make sense if you want to help build the credit of someone who is starting out or wants to positively impact their score. By adding them to your account, you may help them establish or build their credit.

The Takeaway

An authorized user and a joint credit card account are different ways that two people can share a credit card account. With a joint credit card account, both people open the account together and are equally liable for all charges on the account. With an authorized user on an account, only the primary cardholder is responsible for the charges. Those differences may help you decide which (if either) arrangement is right for you.

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.

FAQ

Is a joint credit card holder the same as an authorized user?

No, having a joint credit card account is not the same as having an authorized user on your account. With a joint credit card, both account holders are equally and separately liable for all charges on the account, regardless of who actually makes the purchase. With an authorized user account, only the primary cardholder is responsible.

Is it better to be an authorized user or have your own credit card?

When you are an authorized user on a credit card, you can make purchases and may be able to establish or build your credit, but you’re not responsible for any of the charges. However, it may make sense at some point to work towards having your own credit card account where you don’t have to rely on anyone else.

Can you have 2 names on a credit card?

Generally there won’t be two names on a credit card, even if it is a joint account. In both the case of a joint account and being an authorized user, each person will get their own credit card with their name on it. Depending on the card issuer, the credit card account number may be the same or may be different.

Photo credit: iStock/Igor Alecsander
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

This content is provided for informational and educational purposes only and should not be construed as financial advice.

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