You get yourself a new credit card and think, ‘hey, my kid is going off to school….I’ll give him one too.’ Or perhaps ‘I’ll give one to my elderly mother, just in case of an emergency.’ Then you encounter some financial problems, and end up defaulting on the credit card agreement. You may even contemplate bankruptcy. But you’re confident that your mom and your son won’t get stuck with the credit card bill. After all, you signed it. You applied for it. You made the decision to give it to them. Indeed, you even paid the bill….when you could. They are not going to try and collect it from them.
Think again.
Credit card companies (and the entities who buy their defaulted accounts) are arguing that authorized users are responsible because the terms and conditions of the credit card agreement specifically dictate how authorized users are treated. Sure, that might not have been on the original agreement, when you first got the card, but anyone who has used a credit card knows that terms and conditions change all the time at the will of the credit issuer. What might be permitted today might not be allowed tomorrow. In other words, it can say anything at any time: from the authorized user being responsible for what they buy, to the authorized user being responsible for the entire balance. Still want mom to have a card?
Credit card companies are also arguing that on the merchant sales slip, the consumer signs below language that reads something like “I agree to pay according to the terms and conditions of the credit card agreement.” If the terms and conditions say that the authorized user pays regardless of why, when and how, you might want your son or daughter to use cash rather than plastic as they head off to college.
Indeed, authorized users might be a little shocked when they pull their own credit report to find that your delinquent credit card account is on there. That might make make any holiday homecoming a tad more awkward.
Bottom line: read the terms and conditions. I know they are long, boring (oh, and so very boring), and at times impossible to understand. I know that they come on a small piece of paper that your credit card company intentionally stuffs into your monthly bill with adverts for radios, watches, and other trinkets which are so colorful, pretty, not needed and clearly designed to distract your attention away from reading them. But unfortunately, if those terms and conditions are not carefully read and if you do not understand exactly what you’re getting yourself into, you and your loved ones could be in for a very rude awakening if things in your financial house change.
And change is inevitable, one way or another.
