Pros and Cons of an Add-on Credit Card

You own a credit card and use the card judiciously. You are aware of the benefits and flexibility that a credit card offers. You want that your home-maker spouse and your college going kids should also enjoy such flexibility. However, it is not easy to get a credit card unless you are earning. How do you extend benefits of a credit card to non-earning family members? Well, an add-on credit card can help in such cases.

What Is an Add-on Credit Card?

An add-on credit card is issued to a family member based on your (primary card holder’s) creditworthiness. The bank does not consider how much or whether the family member earns or not. The add-on cards have separate credit card PINs and the card holder gets OTPs for online payments on their mobile phones.

Who Can Apply for an Add-on Credit Card?

You (the primary card holder) must make the application. You can apply for an add-on supplementary for spouse, parents, children and siblings but the eligible relationship can vary across banks. The add-on card holder must be at least 18 years old.

What Is the Credit Limit for Such Cards?

The credit limit for all the add-on cards is subsumed within the credit limit of the primary card. Thus, if the credit limit for the primary card is Rs 1 lacs and you have 2 add-on credit cards for your spouse and daughter, the cumulative credit limit for the 3 cards (1 primary and 2 add-on cards) remains Rs 1 lac. The total outstanding across the 3 cards cannot exceed Rs 1 lac. Your bank may allow you to set-up sub-limits for add-on credit cards. This can help prevent overspending and misuse.

Any Annual Charges on the Add-on Credit Card?

There is no regulation around this. Completely depends on your bank. Usually, there is no extra annual charge for the add-on credit card.

How Many Add-on Cards Can I Have?

Again, depends on your bank. Usually, 2-5 add-on cards are allowed.

Do You Get Separate Statements for Add-on Credit Cards?

No, you don’t. You are the primary card holder and are responsible for all the payments. The spends on the primary cards and the add-on cards will be consolidated into a single statement and mailed to you.

How Does an Add-on Credit Card Help?

Firstly, an add-on card gives a credit option to a family member who otherwise does not hold a credit card. This is empowering. While there is need to be cautious while swiping the credit card or using it online, an add-on credit card provides the family members freedom to spend more than the cash they are carrying in their wallets. And I am sure you can think of many instances where this can be useful.

Secondly, the add-on credit card can help in budgeting.

You know it is easy to manage your expenses if you can track those expenses properly. Tracking is easier if the expenses can be consolidated in a single statement. And that’s where an add-on credit card can be very useful. How?

Well, you won’t be the one always making payment for the household expenses. Your spouse or a family member may have to spend too. If they use cash or swipe a debit card, your expenses get split over 2-3 modes of payment, which can sometimes be difficult to track. If the spouse or a family member has a supplementary credit card, he/she can swipe the add-on credit card or make an online purchase using the add-on card. And everything gets into a single statement.

Thirdly, you get reward points/cashbacks for using credit cards. Therefore, if your spouse/kids use credit card instead of cash, such rewards will increase sharply. While you can question the value of reward points and cashbacks, it is still better than using cash.

Fourthly, while the add-on card provides freedom to the family members, it also provides you a way to track their expenses, especially in case of college going kids.

Lastly, the banks may consider the add-on cards separately for various discounts or cashback offers. So, if the maximum discount per card is Rs 2,000 during a festive sale, you can split your purchases across the primary and add-on cards to get more discount. So, if you have 1 add-on credit card, you can earn Rs 4,000 in discount (Rs 2,000 X 2).

What Are the Problems with the Add-on Credit Card?

You may be very cautious with your credit cards, where and how to use the cards safely. Not everyone in the family may have a similar level of awareness. Their ignorance or recklessness can land you in trouble. While there are mechanisms through which you can limit the liability in case of fraud, such safeguards require that you report fraudulent transactions to the bank on time.

Moreover, if the family member is irresponsible with the credit card, the credit card bill can shoot up. Essentially, you (and the family) end up spending more than you normally would. This is not a good scenario.

And if you can’t repay on time, not only would you have to incur high costs of credit card debt, but your credit score will also suffer.

Therefore, be judicious about who you extend the facility of an add-on credit too. To prevent overspending or misuse on the add-on card, set up sub-limits for usage on the card.

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