Impact of add-on cards on credit score
Add-on credit cards, also known as supplementary credit cards, are issued under a primary credit card. The primary cardholder can get add-on cards for their family members, and these cards usually have the same features as the primary card, like reward points and cashback. Generally, banks don’t charge much, if at all, for add-on cards.
A primary cardholder can request an add-on card for immediate family members, usually ranging from 3 to 5 cards, depending on the bank. The credit limit on the add-on card is the same as the primary card, allowing it to be used up to the total card limit.
How add-on cards affect your credit score
Since all payments for the add-on card are billed to the primary cardholder, any delays or defaults in add-on card payments will be shown in the primary cardholder’s CIBIL report, negatively affecting their credit score. It’s crucial for add-on cardholders to inform the primary cardholder about their transactions and the bill promptly. The primary cardholder should inform all add-on cardholders about this and guide them on responsible card usage.
Considerations for add-on cards
The primary cardholder should make sure the add-on cardholder is financially responsible. For instance, if you’re getting an add-on card for your daughter, check her financial track record. If there are concerns about her ability to handle the add-on card responsibly, it’s better not to get her one. Setting a spending limit on the add-on card can help monitor expenses and keep track of the maximum spending allowed.
Regularly keeping track of all expenses on the add-on credit card is essential. Additionally, guiding add-on cardholders on the proper use of credit cards, including when, why, and where to use them, is crucial.
In conclusion
An add-on card is an extra card with the same limit as the primary credit card, providing benefits to immediate family members. While it’s significant like a primary credit card, the primary cardholder bears the ultimate responsibility for the add-on card. Hence, diligently tracking transactions and expenditures on the add-on credit card is essential, as any defaults can have a detrimental impact on the primary cardholder’s credit score.