If you have ever been asked by your wife, husband, child or
friend to have someone else as an authorised signatory to you,
i.e. a supplemental signatory, on your credit card account you
no doubt gave this some serious thought. If you agreed to the
request, the following are some reason why you should have a
credit card in your own name and they have a credit card in
their own name.
Credit History
Possibly the main reason why you should have a credit card in
your own name is the effect it has on your credit history.
In short, you have had to manage your financial affairs very
astutely in order to gain a sufficient credit worthiness to
apply for, and be approved, a credit card. Conversely, any
supplemental signatory to you on your credit card doesn't have
to do anything - as the card is relying on your credit history
to determine the risk of the third person. This may sound a
little harsh, but if you think about it you are the one who is
responsible for repaying the card, so why shouldn't they rely on
your ability to repay rather than some third person who has no
obligation to repay them if there is an outstanding debt?
Now, you may well be thinking: "That's not a problem, I'll
control their spending." And, you may even be able to manage
that feat. But, here's another reason why you should have a
credit card in your name and they should have a credit card in
their name. Throughout the time that they are supplemental
signatories to you on your credit card account, they are not
enhancing their own credit worthiness - nor are they affecting
their credit rating. So, even if they are good supplemental
signatories and never spend money on your card without first
seeking and getting your approval, it has no positive affect on
their credit history. On the other hand, if they were to have a
credit card in their own name, and were good and managed their
account well, all of this would add lots of brownie points to
their credit history!
Lose - Lose Situation
The reason why having a supplemental signatory on your credit
card account is a lose-lose situation is not only because you
take on the financial risk that they will behave themselves, but
also they have no upside if they behave well. Also, keep in mind
that if your supplemental cardholder runs amok and spends,
spends, spends, it is your credit history that is being
affected, not theirs!
What Does This Mean?
It means that you could work years building up the perfect
credit history and rating only to have it all torn down
overnight by someone else. So, if you don't want that to happen,
make sure have these good reasons why you should have a credit
card in your own name only the next time someone asks you if
they can become a supplemental signatory on your credit card
account.
About the author:
Joseph Kenny is the webmaster of the UK credit card comparison
site
http://www.creditcards121.co
m/, where you can find a selection of
credit card
advice. For US visitors there is also the comparison site
http://www.credit-cards-i
nfo.com/ for all US interest free offers.
