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The Pitfalls of Family Members With Secondary Credit Cards

By: Garry Crystal - Updated: 25 Mar 2012 | comments*Discuss
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Most credit card companies will give account holders the option of adding a secondary card holder. This can be beneficial for family members who have poor credit records but there can be some significant disadvantages.

What is a Secondary Credit Card?

A secondary credit card is basically an additional credit card that has been authorised by the primary credit card account holder. The secondary credit card holder will be attached to the same account as the primary holder. The primary account holder is basically acting as a guarantor for the secondary credit card account holder. The secondary account holder will have much of the same credit card benefits as the primary account holder. The full terms and conditions that apply to both primary and secondary holders will be stipulated in the lender’s agreement.

The Benefits of Secondary Credit Cards

There are certain benefits for people who are added to a primary account holder’s credit card. With credit card companies tightening their lending criteria this is one of the ways for borrowers with poor credit records to obtain credit. The secondary credit card holder can enjoy all of the benefits of a credit card such as cashback and rewards. It may be the case with reward schemes that only the primary credit card holder can redeem these. Many parents add their children to their credit cards as it can be hard for young people to obtain credit.

The Pitfalls with a Secondary Credit Card

There are some obvious downsides to adding a secondary credit card holder to a primary account. Secondary credit card holders who do not make repayments can leave the primary card holder liable for any debts. But this may depend on the nature of the additional credit card. It may be the case that when applying for a credit card, a secondary holder was added but in their own name. If this was the case the primary account holder might not be liable, but this is not likely. This distinction will come under the terms and conditions of the credit agreement and under the discretion of the lender.

Secondary Credit Cards and Credit Records

It is no longer the case that secondary account holders can rebuild their credit scores. The primary credit card holder will still benefit from credit scoring and this could mean a detrimental score if the secondary account holder abuses the credit card. It may be the case that secondary credit cards will be marked down on credit files simply as ‘authorised users’ of the account. The downside for the primary account holder is that the secondary holder could run up large amounts of debt. If these debts are not repaid then this will be marked on the primary credit card holder’s credit file.

Liability for Purchases on an Additional Credit Card

Liability is of course a big issue when it comes to secondary or additional credit cards. Most additional credit cards will have terms and conditions that state that the primary card holder is liable for all debts including those on the additional card. This can and has caused problems when family members have abused the card leaving primary account holders paying back all debts. How financially responsible the family member is should be a major consideration. It may be the case that the family member has had credit problems in the past and this should be a consideration.

Points to Consider with Secondary Credit Card Accounts

Assuming responsibility for a secondary credit card holder is not to be taken lightly. Points to consider should include:

  • How financially responsible is the family member
  • Have they run up debts in the past through non-payment?
  • Are they no longer able to apply for credit cards?
  • Why do they actually need a credit card?
  • Can the primary holder afford to be liable for someone else’s debts?
  • Will the secondary credit card be protected under Section 75 of the Consumer Credit Card Act 1974?
  • Does the family member have regular income?
  • Is the family member still undergoing debt problems?
Lenders may apply full liability to the primary account holder for all debts incurred by the secondary holder. There have been cases where lenders have shown leeway over debts run up on secondary accounts, and negotiations can be undertaken. The terms and conditions of the credit agreement should always be read carefully before assuming responsibility for a secondary credit card holder.

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