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August 2008 - Supplementary card for your child is not always good

Supplementary card for your child is not always good

☳ by Adam Aspilla

It is parents’ nature to love their children, thus, they provide the needs of their children: food clothing shelter and toys when they are young. When children are grown up, they send them to school some up to college or university. To be sure their children would have access of cash when they need it they provide them supplementary credit cards. It is a noble intention, however, sometimes it could do harm to their children’s future than good.

Credit cards generally are unsecure debts. They are issued on the basis of good credit rating and stable employment. As a credit card holder, you could request a credit card company to issue 
a supplementary card to your relative or friend. The credit card company would grant your request regardless of income or credit rating of the person you want a supplementary card issued, for the basis of issuance is on your good credit rating and your stable employment.

Supplementary card simply means you are allowing your relative or friend to jointly use your credit limit. Though, you are the principal borrower, should you default on your payment, your supplementary cardholder is liable to pay the entire balance of your credit card, for once she/he is a supplementary cardholder she/he becomes jointly and severally liable to pay whatever is the entire balance owing. It simply means the supplementary cardholder becomes your guarantor. If your supplementary cardholder is your child and you are unable to pay for whatever reason, the credit card company would pursue collection against your child as well. If your child has no resources to pay the amount demanded, your child credit rating would go down the drain and it would adversely affect her/her ability to apply for her own credit in the future.

A good example was a mother who requested a credit card company to issue a supplementary credit card to her son who went to university. Her credit limit was $20,000.00. When her employer’s business slowed down, she was laid off. As a result, she used her credit cards to pay her basic expenses until her credit limit was maxed out. Unable to find a new job, she defaulted on her payments. The credit card company demanded payment not only from her but including her son. It was unfortunate the mother had to file bankruptcy and her son did file as well for he had to other choice, because he was liable to pay for the entire amount of $20,000.00.

You may have a good intention of providing your child a supplementary credit card, but you have no control what would happen in the future. Unless you are in control of your finances in the future, it is not a good idea for your child to have a supplementary card as in the above case scenario. 

If you wish to cancel the supplementary card issued to your child you can simply ask the credit card company and usually your request would be granted if your account is in good standing. It would be much better for your child to apply for her/his own credit card with a low credit limit than having a supplementary card.
 

 

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.