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April 2014 - Supplementary credit card – A potential problem

Supplementary credit card – A potential problem

☳ by Adam Aspilla

Not all applicants for credit card could get approval, for credit card companies have standard credit requirements before an application is approved like: stable employment, sufficient income, and good credit rating.

If one of the above requirements is not met, an application for credit card is usually  disapproved. When an applicant could not secure a credit card because of the above reason, there are two common ways to get a credit card other than the usual process stated above. 

One way is by applying for a secure credit card, and by way of a supplementary credit card. To get a supplementary card, you have to request your relative or a friend who is a principal credit card holder of a major credit card (Visa, Mastercard or Amex) in good credit standing. Said friend or relative would simply request the credit card company to issue a supplementary card in your name.

This does not require your application, for the issuance of a supplementary card is based on the good credit standing of your relative or friend who request for your supplementary credit card. It fact, it is only an additional credit card issued against the existing credit limit of the primary credit card holder.

On the surface it is really good, for someone who is kind to accommodate you to have a credit card. However, there is a potential problem for both the principal credit card holder and the supplementary credit card holder.

A problem arises when payment is on default. Meaning, when the principal credit card holder is unable to pay the amount due on his/her credit card purchases or cash advances, the credit card company can run after the supplementary credit card holder for the full amount due which the principal credit card holder is unable to pay. 

Similarly, when the supplementary credit card holder is unable to pay the amount due on his/her credit card purchases or cash advances, the credit card company can also run after the principal credit cardholder for the full amount due which the supplementary credit card holder is unable to pay. 

This is so, for both the principal credit card holder and the supplementary credit card holder become co-signers. As such, they are jointly and severally liable.

Considering a potential problem as mentioned, before requesting for a supplementary credit card or granting a request for a supplementary credit card, be conscious of your financial responsibility and the consequence, for when either one  (principal credit card holder or supplementary credit card holder) defaults his/her payment, it does not only destroy friendship, but it could ruin credit ratings. Once a credit rating goes down the drain it would take years to rebuild.

 

 

Adam Aspilla is a Senior Financial Counselor of the Debt Clinic of Canada Inc. and the author of the book, You Can Negotiate All Your Debts. He also writes a biweekly column, “What Matters In Life” in “Taliba Newspaper. For free initial, professional and confidential consultation, please call 905-306-7572.