Am I responsible for someone else’s credit card debt?

While credit card debt has trended downwards since the COVID-19 pandemic hit, managing debt is still a burden on many households in Australia, with outstanding credit card balances totalling $20.6 billion as of February 2021.

Even if you’ve got your own credit card balance under control, you may be wondering what role you play when your spouse, child or someone else is struggling with credit card debt. Let’s take a look at when you could be liable, and why responsibility usually stays with them.

When could I be held responsible for someone else’s credit card debt?

Usually, the person who opened the credit card account is the only one legally responsible for debt, but here are 4 situations when you could also be held accountable:

1. When you have a joint credit card
2. When you add someone as an additional cardholder
3. When you get a business credit card
4. When you act as a guarantor

1. When you have a joint credit card

There are only a few banks in Australia that offer joint credit cards, and many couples with shared mortgages choose to have separate credit cards or become secondary cardholders instead.

But if you have a joint credit card account, you are both legally responsible for making the repayments as the card is in both of your names. You are liable for the full amount owed, not just 50% of any debt owed.

In the event of a separation, your first step should be to contact the bank to inform them of the change in circumstances and ask that no further credit be given on the account.

2. When you add your spouse or someone else as an additional cardholder

If a spouse or family member is a secondary cardholder on your account, they can act as an authorised user with their own card that is linked to your account. This means you remain the primary cardholder and are solely responsible for any debt accrued on the account.

But you may cancel a secondary card at any time without the other person’s permission, even if you opened the account for them in the first place. If your name is the only one on the account, you have control over removing any additional cardholders.

3. When you get a business credit card

Business credit cards can be set up with either personal liability or business liability for the debt. If you get one that’s set up with personal liability, that means you (as the primary cardholder) would be personally responsible for the debt.

In comparison, business liability means the business entity is responsible for the account.

If you want a business credit card for work spending, make sure you check what liability options are available so you know whether you’ll be the one responsible for any debt.

4. When you act as a guarantor

Guarantor arrangements are much more common for larger, secured loans, such as mortgages. It’s unlikely you’ll be able to act as a guarantor for a credit card, which is unsecured type of credit with no official end-date.

But if you’re a parent, you might be thinking about becoming a guarantor to give your child some financial independence. You might also consider being a guarantor to help a spouse or loved one gain access to credit if they have a low income or a poor credit score.

If you do this (for any type of credit), you will be responsible for some or all of the debt if they can’t service it. If you are going to act as a guarantor, it’s a good idea to set some ground rules or have an open line of communication about spending to avoid a negative credit score.

Is a secondary credit card holder ever responsible for debt?

The simple answer is no. The primary cardholder (the person whose name is on the account) is the sole person responsible for debt on the account. They can still make payments towards the balance, though. They also have to agree to the card’s terms and conditions, and have a responsibility to let your provider know if their card is lost or stolen.

Bottom line? If you’ve added someone as an additional cardholder, talk to them about how you will both manage the account.

Can you be responsible for someone’s debt if they die?

The death of a loved one is a very stressful and challenging time, and there is help available when it comes to dealing with a family member’s credit card debt. Usually, any assets from the deceased estate will be used to pay off outstanding debts that are held solely in the name of the person who has died. There are also life insurance policies that include cover for debts. If the debt is held jointly – in your name and theirs – then you will be responsible for it.

It’s important to inform your bank as soon as you can after the death of a spouse or relative to avoid further hardship. Most banks have bereavement policies to help you manage financial affairs at this difficult time.

How to check if you’re responsible for someone’s debt

Generally speaking, you are only responsible for someone’s debt if you have a joint account, such as a loan or a credit card, in both of your names. If you want to check if any of your accounts are shared, one of the simplest ways is to get a copy of your credit report and see what accounts are listed on it. Other ways you can check include:

• Check the account statement. Find a copy of the statement and check which names are listed on the account. Note that some banks may issue two of the same statement; one in your name and one in your partner’s name.
• Check the original agreement. When you signed up to the original account or credit card you agreed to the terms and conditions for the account. Contact your provider for a copy if you’re unsure or cannot locate the original agreement.
• Contact a free legal rights service. It’s easy to get overwhelmed when it comes to financial matters, however there are many free legal advice and counselling services available. Contact Legal Aid in your state or the Financial Rights Legal Centre, which provides free telephone legal advice to consumers on credit, debt, banking and insurance matters, on 1800 844 949.

Need support now?

The National Debt Helpline has a free financial counselling service that can help you understand your responsibilities and rights. You can speak to a financial counsellor for free by calling 1800 007 007 between 9:30am and 4:30pm, Monday-Friday. The website also has a live chat service and resources on your rights, debt solutions and complex situations such as financial abuse.