Lending credit cards to relatives

It can often be the case that people belonging to the same family have radically different credit ratings, and the family members who don’t need to borrow money have plenty of credit available while those who need credit cannot get it. In these cases there is often the temptation to lend a credit card to a relative, but this should be avoided.

There are many reasons why credit cards should not be leant to family members. One of the main ones is that it can create misunderstanding and distrust. The person lending the credit card may have one idea of what the agreement covers, and the person borrowing the card may have quite a different idea. There does not need to be any deceit in this, simply a difference in understanding, whereas if cash is given for a purchase in advance, the room for confusion is far less.

If a lot of money is lost, usually credit cards carry a zero liability guarantee and the card provider will reimburse the account holder for purchases deemed fraudulent. However, this zero liability guarantee is invalidated if the credit card has been given to another person, including a relative, even if the amount actually charged to the card is smaller than the amount agreed.

There is also the risk that the person borrowing the card may be accused of impersonating the account holder. Even though there is no intention to defraud the vendor, the borrower could face charges of identity theft.

If the need is for a one-off purchase, it is often a better idea to purchase the item personally rather than lend the credit card. This rule of thumb holds whether the item can be simply purchased over the internet or the phone, or if the card holder must visit a merchant or service provider in person.

Co-signatory cards are a longer-term option for solving the problem of less credit-worthy relations. This credit card allows the main borrower to effectively borrow the guarantor’s credit rating, giving the main borrower access to a higher credit limit, lower interest rates, and more attractive terms and conditions than he or she would otherwise have.