Soft Heart, Hard Choices
If you lend your credit card to a friend in financial need, trying to be helpful, there's a decent chance that you'll end up with increased debt – and possibly an ex-friend.
A recent survey by CreditCards.com found that 49% of Americans that have owned a credit card at any time have loaned their card to others to use – including family members, co-workers, and friends. Of that group, 35% suffered some type of negative consequence. Overspending was reported by 19% of card lenders, while 14% of card lenders were never repaid for credit card charges. Even sadder: 10% never got their card back at all!
The survey results imply that approximately 36 million Americans have experienced problems when loaning out a credit card. Are you in that group? If so, would you take the same risk again? We suggest looking for alternatives and considering why a person wants to borrow your credit card in the first place.
Keep it To Yourself
Technically, you are violating the terms of your credit card by allowing someone else to use it. The credit card issuer generally doesn't care who uses it, as long as the bill gets paid by someone – but card sharing increases the risk of a bad outcome.
Many people do share their credit cards without incident, especially with family. Approximately 30% of survey respondents have loaned a credit card to a spouse/partner, while 21% loaned credit cards to their children. Card sharers are a generous lot, with just under half allowing an immediate family member to rack up over $100 in charges and 11% allowing charges above $1,000.
Others tend to guard their cards closely. Almost two in five cardholders say they wouldn't allow even a family member to use their card under any circumstances.
Card sharers who were aged 55 or older, married, or holders of advanced degrees were the least likely groups to have bad experiences when lending credit cards. In contrast, millennials from the ages of 18-37 were more likely to lend credit cards to friends and also more likely to lose their cards as a result. Younger Americans may be too trusting or lack the experience to assess whom to trust with their credit account.
If you plan to share your credit card, you should be a good judge of character and risk – but why even take that risk at all? Ask yourself if there's a better way to help without exposing your credit card account to potential abuse. Why not use cash? That way, you can't lose any more money than you hand over.
What Are My Options?
What's your recourse if someone borrows your card and loses it or fails to pay you back? There are few legal protections. Fraud does not apply, because you willingly loaned the card out and violated the terms.
You must notify the card issuer of a lost card as soon as possible. Typically, your liability for unauthorized charges is limited to $50 under federal law, but you effectively authorized the charges by loaning the card to someone in the first place. The longer you wait, the more difficult it will be to argue that the use was unauthorized.
If you're trying to get repaid and requests are refused, your best option is to file an action in small claims court. You can represent yourself there and save legal costs that are likely to be more than the money you're trying to reclaim.
Rules for filing and maximum claim amounts vary by state. The National Center for State Courts can help you find the proper court for filing (under "Court Structure Graph").
Make sure that you have as much evidence as possible to back your claim. Receipts will help, but any recorded communication (e-mails, texts, etc.) that bolsters your case is best. Take notes of any relevant conversations and requests for repayment.
Think carefully before you lend a credit card to a friend or family member in need. Is that the best way to help financially? Why would a credit card be preferable to something finite, like cash or a prepaid card?
Think like a bank and consider the risk of non-payment. Is this person responsible and likely to pay you back? Are you helping someone out of a short-term situation or are you enabling a deeper long-term problem with spending?
Still want to lend your credit card to others? If you want to let someone use your credit card on a periodic or running basis, contact your card issuer and make that person an authorized user of your card. For short-term or single uses, establish the expectations for credit card use (charge limits, etc.) and put them in writing. It doesn't have to be a notarized legal document, but if things go awry, you'll have a document establishing your intentions.
Whenever possible, we suggest taking the sage advice of Shakespeare.
"Neither a borrower nor a lender be,
For loan oft loses both itself and friend."
If you want more credit, check out our list of credit card offers.