Lately, credit cards have become one of the preferred ways to make purchases. With credit cards, you do not only get the convenience of borrowing funds for small and large purchases but can also enjoy lucrative returns in the form of rewards, cashback and discounts. However, not everyone qualifies to get a credit card as there are certain eligibility criteria set for the applicants. In these cases, the facility of add-on or supplement credit cards comes in handy as it provides a chance to use a credit card and avail its benefits to those who do not qualify to get their own card. It also helps maximise the savings that can be made using a credit card by utilising its features and benefits to their full potential by multiple users.
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What are Add-on Credit Cards?
Add-on credit cards are secondary or supplementary cards issued against the primary credit card account and generally come with the same benefits that are offered on the primary card. Primary cardholders can get add-on cards for their spouse, children or parents. However, only the primary card user holds the responsibility to track and repay all the dues incurred on that account.
How do Add-on Credit Cards Work?
Once the add-on cards are issued, the credit limit assigned to that account is shared among all the cardmembers. Though the secondary cardholders get to enjoy all the card features, it is the primary card user who has the sole control over and full responsibility to the credit account. The primary cardholder can set the add-on card limits, monitor the card spendings and even cancel the add-on card, if necessary. Moreover, all the transactions made via the primary or add-on cards are also billed to the primary member and only he or she is accountable for the timely repayment of all the card dues.
Pros and Cons of Add-on Cards
Add-on credit cards can be beneficial and rewarding when used mindfully, but can also end up being a financial mistake if not managed properly. Given below are some of the pros and cons of add-on credit cards which must be kept in mind:
- Rewards Maximisation: Add-on cards widen the scope of earning credit card rewards. In case of a single cardholder, it might be difficult to utilise all the card features to their full potential, but if there are multiple users, then it is possible to maximise the rewards that can be earned via the card by making full use of the available benefits without overspending.
- Introduction to Credit for Add-on Users: Those who do not have their own primary credit cards can take advantage of being a secondary cardholder to get an introduction to credit. The add-on members can use this experience to understand how credit cards work so that they can manage their future primary cards better.
- Savings on Card Fees: Most add-on cards come with no or minimal annual fee with the same benefits as the primary card. This can prove to be quite economical for the family as a whole when compared to each individual paying annual fee for their separate primary credit cards.
- Full Control to Primary Cardholder: The primary cardholder has complete control over the credit account, including the add-on cards. They can apply for add-on cards, set the cash withdrawal, spending and other card limits for all the credit cards linked to their account, monitor the card spends through the monthly credit card statement and also cancel any add-on card when required. This reduces the risk of misuse of their credit and helps in efficient account management.
- Billing Responsibility on Primary User: The primary card user is the only person responsible for maintaining the credit card account, irrespective of the number of secondary cardholders. All the transactions made via the primary or add-on cards are billed to the primary card user who holds the sole responsibility of repayment or else is charged with additional interest. If any of the add-on cardholder overspends, even then the primary member will have to face the consequences.
- No Effect on Add-on User’s Credit Profile: Even though the add-on card users get to experience how credit card works and avail its benefits, they cannot rely on their add-on cards to build their credit profile. How they spend or use the credit line has no effect on their own credit score, but rather is linked to the primary cardholder’s credit profile. So, if the secondary members are looking to build their credit history or score then add-on cards will not be beneficial to them.
- Effects on Primary User’s Credit Score: The way add-on card users spend and utilise the credit limit is reflected on the primary cardmember’s credit profile. If managed wisely, add-on cards can help improve the primary user’s credit score. But if the add-on card users are careless with their usage and make too many big ticket purchases due to which the primary cardholder struggles to repay the card dues, then this can have a negative impact on his or her credit score. So, the primary credit card user runs the risk of the add-on user’s bad credit behaviour affecting their credit score negatively.
Add-on credit cards are a handy financial tool if utilised wisely. They can help in taking advantage of the card features while maximising the credit card rewards accrual and overall savings. However, the cardholders must make sure to allow only trusted family members to avail this facility to avoid getting debt trapped by ensuring they do not overspend or misuse the add-on cards.