Have you ever lent your credit card to a relative or friend to make a purchase, or bought something using someone else's card?
Perhaps you've punched in someone else's card number on his or her behalf to facilitate an online order. Maybe you've signed your spouse's name on a credit receipt. Doing any of these things is in violation of the credit card agreement, which states that only the person whose name appears on a card can use that account.
Most times, these are harmless actions, but as some experts and card users will tell you, sometimes there are consequences.
"In general, I'm no more likely to loan someone my card than I am my car. Either way, you're accepting liability for someone else's actions," says Liz Weston, a columnist for MSN Money and personal finance author.
It's friendly, not fraudulent
Issuers ban the practice of letting another person use your card, but if you did so willingly, you are breaking your contract, not a criminal law. If someone uses your card without your permission, that's different: That's fraud. Provided you report the unauthorized use to your card issuer and the authorities, you are not held liable for fraudulent charges.
Even if the use is friendly, not fraudulent, bad things can happen. Chief among them: Charges that result from you voluntarily lending out your card are your responsibility.
To protect yourself when others use your card, don't think so much about the legalities, says Robert Lawless, professor of law at the University of Illinois at Urbana-Champaign, who specializes in bankruptcy, consumer credit and business law. "Instead, protect yourself by preventing problems before it ever gets to that point of worrying about legalities by using good judgment," he says.
For instance, using your elderly parent's card to buy groceries is breaking the card agreement, but it's likely that no one is going to question that type of transaction provided the bill is paid, says Lawless. "As a practical matter there are going to be circumstances that arise when people don't follow the contracts, and there are really no consequences to them."
However, for every innocent incident of credit card borrowing or lending, there are potential problems that can result. Here are a few to keep in mind:
A one-time privilege gets stretched. If you authorize someone to act on your behalf, you can't then go to the credit card company and say you refuse to pay for what was charged, says Lawless. In other words, you will be on the hook for any charges racked up by the person using your account. A sample Capital One credit card agreement, under the section, "Your Promise to Pay" plainly states: "If you let someone else use your Card, you are responsible for all transactions that person makes."
"I've had adult clients who gave their teens a card to go get gas, and then found out they went out to dinner, to the movies, etc.," says Terrence Shulman, founder/director of The Shulman Center for Compulsive Theft, Spending & Hoarding in Franklin, Mich. In some of the more serious offenses, people end up having to file a police report on a loved one to try to recoup some of the charges, he adds.
The person borrowing the card is careless and identity theft results. Whether they foolishly leave the account number sitting on their desk at work, or use the card to make an online purchase on an unsecured site, your account could potentially be at risk when it's out of your control. "Even if I trust the person, giving them my card makes me more vulnerable to fraud committed while the card is out of my possession," says Weston. "When there's a fraudulent charge, the issuers always ask about that, and I wouldn't want to give them any grounds to decide I have to eat the bogus charge."
Embarrassing moments. You're about to make a purchase using someone else's card, and the clerk asks for your photo ID, which of course, should not match. What to do? You'll most likely have to walk away or you can try to plead your case. Aly Walansky, a Brooklyn, N.Y.-based beauty and style blogger, recalls what her mom used to do when they were out shopping together. "When I was a kid, my mom would always use my dad's card. His name is Martin, so they always gave her a hard time. She'd be like, 'It's pronounced Mar-teen. We're French.' We're not," she says.
Getting flagged for fraud. In cases in which the merchant becomes suspicious that you're not the cardholder and you don't have permission to use the account, they can alert the creditor to possible fraud, confiscate the card or, worse, call security. In fact, card companies have a credit fraud alert hotline for just this purpose. For example, MasterCard's website instructs: "Call the Authorization Center and request a Code 10 authorization. A Code 10 authorization request alerts the card issuer to suspicious activity, without alerting the customer ... If it becomes necessary to notify the police, the operator will do so while your employee waits on the line."
A better alternative
As you might imagine, creditors take a hard line on this matter. "Only the person whose name is on the front of the American Express Card may use it," says Elizabeth Crosta, vice president of public affairs for American Express, "but there are other really great options."
For example, many people choose to add a child over the age of 16 or a household employee such as a nanny to their account as an authorized user, she says. It's important to remember that you're ultimately still responsible for any charges authorized card users make, but you can set spending limits on the additional card and be alerted when that limit is reached. "This is especially helpful for a parent whose child is heading off to college for the first time and wants to give the child a safe and convenient way to make purchases," says Crosta.
Another option: Consider getting the person a prepaid, reloadable card so that he or she can only spend up to the amount that's on the card.
As for situations in which something comes up spur of the moment, according to Matthew Towson, senior manager of media relations for Discover, all it takes is a quick call to add someone to your account. "An authorized user is added to the account the moment the request is made, even though it can take a few days for the card to arrive," he says. It's worth noting, however, that a merchant may still decline the purchase if they ask for identification and it doesn't match the name on the card.
Of course, as a consumer, you may have noticed that merchants don't always check IDs or signatures, which may be why people think it's OK to bend the rules. If you decide to do so, just be careful who you trust, says Shulman, since good intentions can quickly go awry. "Fraud by people you know happens a lot more than you think," he says.
Whether or not you want to take liberties with your credit card account is up to you. Just remember that as far as the creditors are concerned, the primary cardholder -- that's you -- is the one who will be expected to pay up.