So you've emerged from Chapter 7 or Chapter 13 bankruptcy and you even have a new credit card. First of all, congratulations, you're well on your way to rebuilding your credit after bankruptcy. You are joining the millions of Americans who are taking full advantage of the fresh financial start that bankruptcy offers. But what happens when your friend or relative wants to add themselves as an authorized user? Well what should happen is that you say no; but what often happens is that post-bankruptcy debtors add family and friends as authorized users on their credit cards in an effort to help them out.
Below are some very good reason why authorizing others to use your credit card is a BAD post-bankruptcy move:
- An authorized user is not responsible for the charges made on your credit card. We're not talking about joint account holders, we're only talking about authorized users here. Even if an authorized user charges up thousands of dollars on your credit card, there is nothing you can do about it other than cancel their card.
- When you place an authorized user on your credit card, you are placing your financial well-being in someone else's hands. If they charge up large amounts of debt on your credit card, it will be your credit that suffers. Even if you pay the charges your authorized user accrued, the extra debt could increase your debt to income ratio and still harm your credit rating.
- Adding family and friends as authorized users on your credit card can strain your relationship with them by making the relationship into a debt/lender type interaction. Avoid financial and relationship problems by not adding family and friends to your credit card as an authorized user.