It’s all too easy to do — an errand needs to be run, a cost needs to be covered, an ATM is too far away — and, suddenly, you find yourself turning over your credit card to your kid, spouse, friend or family member. It’s a just a one-time thing (or a once-in-a-while thing), sure, but there’s good reason to refrain from forking over your plastic.
Not Illegal, Just ‘Prohibited’
According to National Consumer Law Center Associate Director Lauren Saunders, it’s not illegal to lend someone else your credit card. In other words, that little loan is not breaking any federal or state laws.
But there’s a good chance you’re violating your credit card contract.
“Nearly all cardholder agreements prohibit loaning a card or at least make it clear that the cardholder is responsible for any charges,” Eric Lindeen, vice president of marketing for ID Analytics in San Diego, California, which offers fraud prevention tools and credit risk management scores to issuers, said in an email. “So it is a violation of your contract, but only ‘illegal’ if there is fraud involved.”
So Long, Zero Liability?
Federal law limits credit cardholders liability for fraudulent charges to $50. (Debit cardholders, for the record, are responsible for $50 if they report fraud within two days and up to $500 if they report within 60 days. After that, they could find themselves paying for all unauthorized charges.) Most cards tout zero liability policies that provide even more coverage. But all those stipulations are essentially rendered null and void if you willingly turn your plastic over to a friend or family member and fraud ensues.
So, say, the person you lent your card to picks up shoes for themselves alongside that coat you asked them to pick up, you’re most likely going to wind up paying for those Manolo Blahniks. And, in a worst-case scenario, you could also lose money if said person lost your card, someone else were to find it and identity theft took place — though the federal protections will generally limit your liability as previously specified. That’s because most zero liability policies won’t apply if there’s evidence of “gross negligence” on part of the cardholder — and, yes, lending your card to someone else can fall under this umbrella.
Finding Another Way to Pay
“It’s definitely not recommended,” a Visa spokesperson said in an email, regarding giving someone else your credit card.
Of course, there are ways you can arrange for a family member to have a plastic way to pay for items without violating your credit card agreement.
Many issuers allow primary cardholders to add authorized users to their account, and while you’d still be liable for any charges this person makes, you do generally have control over whether or not they stay on the account. Some issuers, too, will let you set spending limits or set up alerts for authorized users. And, at the very least, that person will have a card in their name to make payments, so they won’t risk getting declined or flagged by merchants for trying to make a purchase with someone else’s card. You could also consider co-signing or opening up a joint account with someone close to you, though there are different risks associated with that as well.
Finally, should you ever “lend” your card to someone else, be sure to keep a close eye on your statements. That way, you can spot any unauthorized charges (from the borrower or someone else) as soon as they occur. You may wind up paying for those purchases, but you’ll at least be able to stop any more from occurring so long as you call the issuer and have the card replaced.
And, of course, if you ever have reason to believe someone let your personal information get compromised along with your payment numbers, it’s a good idea to keep an eye on your credit for signs of deeper identity theft. (You can do so by viewing two of your credit scores for free each month on Credit.com.)
Image: Eva Katalin Kondoros