Pay up relative’s card debt or have your credit trashed – case of co-signing!

Lending your personal credit to a friend or family member for use in a small business may be considered a kind gesture.

But it’s often a dangerous one. They need your personal credit to opentheir own business credit card for a business to build its creditworthiness because they can’t prove it based on their own track record. This alone is a red flag. And choosing to sacrifice your personal finances to help a family member in that manner often backfires.

When they turn out in debt that they refuse or are unable to pay, there is little you can do to protect yourself from the liability but to pay up. A sure bet is, it’s also hard to determine their true situation – whether they could be persuaded to pay the bills or not.

Such people go unpunished all the time. The creditors won’t look into your family situation, they consider you liable as long as you signed a contract binding you to the credit.

Joint account

It would be a joint account if both you and the family member signed as joint applicants. You both have equal access to the account and control over it.

Equally, such co-signing commits both of you to a shared responsibility for debts incurred even though you won’t typically have a physical card for the account. Your role remains similar if you took up a guarantor’s position.

Joint and several liability 

There are some small-business cards that provide for ‘joint and several liability’, an option that provides shared responsibility between the signer and the business. Nonetheless, this doesn’t absolve you, the signer of the responsibility for debts either.

So, the credit card company will often pursue you if the business owner refuses to pay the tab whichever way the co-signing happened. And this can lead to trashing of your credit should you fail to settle the payment.

Way out?

Notify the issuer of the credit card about the situation. Then take any necessary steps to immediately shut down all charging privileges on the card.If it gets to a point where your card is trashed, you could be looking at a complicated situation. Thanks to new payment processing organizations like First American Merchant ( however, you can still get other credit card applications instant approval even as you figure out how to pay the debts on the business account.