Who's Responsible if a Friend Maxes Out My Credit Card?

Imagine that you lend your car to a friend and they get involved in a serious accident. Even if you weren't behind the wheel or even in the passenger seat, you would still bear some or all of the financial responsibility for the damages caused. In much the same way, if you lend one of your credit cards to a friend and they take it for a joyride at the mall, the financial destruction they cause is your responsibility. With very few exceptions, you are financially responsible for your credit cards all the time.

It's 2 a.m. — Do You Know Where Your Credit Cards Are?

If someone steals your credit card and goes on a wild shopping spree, the most you will have to pay is $50 if you report the loss within a reasonable time limit; some creditors may even wave this nominal fee for good customers. On the other hand, if you give your significant other your credit card and he or she charges up to your credit card limit, you are legally responsible to pay the entire debt. If you open a joint account with a friend, this will limit your responsibility for the credit card abuse. As joint account holders, you are equally responsible for the debts incurred on the card.

If someone steals your credit card and goes on a wild shopping spree, the most you will have to pay is $50.

Adding an Authorized User to Credit Card Accounts

Before the current credit crisis, it was not uncommon for a credit card holder to add someone as an "authorized user." This person could be a family member, spouse or friend. In essence, you are giving another person the ability to charge goods and services and take cash advances against your credit card account. Until recently, most credit card issuers were encouraging their good cardholders to add friends and family to an account to rack up more rewards points and frequent flier miles. Since an authorized user bears no financial responsibility for the balance, they could easily engage in credit card abuse, leaving you with a whopping bill at the end of the month.

Ways to Prevent Credit Card Abuse

Credit cards and your FICO score, a credit scoring system created by the Fair Isaac Corp., should be safeguarded; good credit is a precious commodity. Even if you want to be a nice person and help out a friend in need, it always pays to curb credit card abuse:

• Keep your credit cards in a safe place, preferably a location where your friends and roommates can't locate them easily.
• Check your balances online at least once a week. If you have suddenly reached the credit limit on one of your cards, chances are that one of them was borrowed.
• If a friend desperately needs money, consider a cash advance. You will pay a surcharge and a higher interest rate, but you will not relinquish control of your credit card, heading off any potential credit card abuse at the pass.
• If you are a good credit card customer, some banks and lending institutions will send you special checks with discounted interest rates, sometimes as low as 3.99 percent. If you want to lend money, use one of these checks, but be careful not to go over your credit card limit.

Steven Bryan

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