With credit card companies being ultra-careful about selecting customers, co-signing a credit card is back in vogue. But if you’re asked to co-sign on a card, know the dangers of doing so before you sign on the dotted line.
What kind of dangers are we talking about?
1. You get the debt.
First and foremost, when you co-sign a credit card, any debt incurred could easily ricochet from the cardholder to you. The bank doesn’t care who they get the money from to satisfy a credit card debt, so if they can’t get it from the primary cardholder, take a guess who it will come after next?
There is, after all, a reason why banks demand a co-signor in certain situations. If a card issuer thought it could collect off a cardholder, it wouldn’t need a co-signer in the first place.
2. Increased credit risk.
Besides potentially facing a mountain of credit card debt, you could endanger your credit score by co-signing on a credit card. Let’s say you co-sign for your college-age son, who eventually falls behind on his card payments. If the money isn’t paid, not only is your son’s credit rating heading over a cliff, yours will be too. In addition, if you need a loan someday, and your son is behind on his card debt, creditors may use that debt to deny you a loan.3. Risk of lawsuit.
Credit card issuers aren’t above using legal means to get their money. So if you sign off on a credit card, and the primary cardholder creates a mountain of debt, you might have to go to court, reveal all your assets, and risk losing them to satisfy credit card debt you didn’t accumulate.