Sharing Accounts to Maximize Cash Back and Interest Earnings
May 4th, 2008
The other day I posted a comment about how my sister and I share an AMEX Cash Back credit card on Kevin’s post $327 in AMEX Cash Back Thus Far at No Debt Plan and he emailed me to ask out of curiosity why I share an account with my sister because it sounds so risky. What if one of us decided to go on a shopping spree and screwed things up for the other person?
I emailed him back explaining our logic, and while it may be unconventional, for us it is a convention we have practiced with success for many years. Ever since our high school days when our parents would give each of us pocket money for lunch, the bus, pay phones, etc. we have always regarded our money as literally “our money.” When one of us didn’t have any cash and wanted to buy a drink or snack at school, we would just ask the other person for some. And to the shock of many of our friends, we would just give each other the money. We never had a distinction of “my money” and “your money”.
Perhaps this had to do with our always having been somewhat unconventional people, even as kids. While our friends went to the mall, movies or shopping, we preferred to go to the library, karate class, or stay at home and read or play with our pets (we had dogs, cats, 20-30 rabbits, guinea pigs, birds, fish, mice, etc.). So for us, money was never really a means for pleasure but living - taking the bus home from school, buying lunch or an occasional snack or buying pet supplies. Because we didn’t habitually spend money, our parents didn’t put us on allowances and would just give us money when we needed it. (This could explain why we still live on a No-Budget System.)
When we graduated from college and started working, we continued to share a home and a bank account. Perhaps this has to do with our mother passing away when I was 16 and Madoline 14, and having no other close relatives we just naturally stayed together. In the past 6-7 years we have shared a bank account, a family cell phone plan, utilities accounts, a car loan, credit cards, leases on apartments and then a mortgage starting 2005. And we also started 2 business ventures - Franga Designs and Mozartini - and this blog together.
Because we have the same financial goals and past (having witnessed firsthand the imprudence of shopaholism and extreme debt courtesy of our stepfather and biological father), there is no worry that the other person will go on a spending spree. We are so uptight about spending that we always run purchases by the other person and all expenditures are joint decisions.
Another reason we are not worried about the other person messing up our finances is that since we have no other close family, we regard our dogs Ludwig and Wolfgang as our family and we value them to the extent that we will not risk not being able to care for them properly due to lack of money.
Aside from all this, we also recognized other advantages to sharing our bank and credit card accounts:
- Higher Dividends
Higher savings account balance means higher interest rates and therefore higher interest earnings. At our credit union, the current savings dividend rates are tiered for balances under $999; $1,000-$4,999; $5,000-$9,999; and over $10,000; so it is advantageous to keep our money together to earn higher dividends. - Higher Cash Back Earnings
With AMEX, we have to charge $6,500 before getting the 5% and 1.5% cash back rate. We spend quite little so it takes the 2 of us about 6 months just to reach the $6,500, and that is often with the “help” of a very large expenditure like replacing the transmission on our car. - Higher Credit Scores
By alternating credit card applications, we have fewer inquiries on our credit reports, meaning higher credit scores. For example, in 2006, we applied for the AMEX card in Madoline’s name because she didn’t have a credit card at that time. In January 2008, we applied for an Amazon Visa in my name because we shop there often for household things and many businesses in our area do not accept AMEX. - Build 2 Credit Histories At Once
When either of us gets a new credit card, we add the other on as an additional user and the account also appears on both of our credit histories. This helps to build 2 credit histories at once with every expenditure. - Saving Money
We had separate checking accounts for a short time in college, but this sometimes led overdrafts (and in overdraft charges) on one of our accounts, because even though we had enough money between the two of us, splitting our money into 2 accounts and alternately debiting our purchases from 2 checking accounts got confusing. We would sometimes lose track and charge too much on one account. (We did all our grocery shopping together because we lived together and our money was only spent on food, miscellaneous things for school, and our pets.) - Saving Time
This goes for credit cards as well as other bills. Having one account between the two of us decreases the number of bills we have to pay each month.
So, yes, it is unconventional, and probably wouldn’t work for most people, but it is also advantageous in many ways. However, we don’t recommend trying this unless it is with someone you can trust 110% and who shares your financial goals, way of life … and, well, life.
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Last 5 posts by Penelope Pince
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May 5th, 2008 at 8:32 am
As long as you can trust the other person, then I suppose it’s alright. I don’t want to come across as the guy who draws a line in the sand and says “never!”. It can work out, but you hear so many stores on Dave Ramsey’s show about how Relative A did something with Relative B’s credit. If you two are comfortable with it, then go for it.