Who Is Liable on Your Credit Card Debt? Applicants vs. Users

There are two types of “people” in the credit card world that are frequently confused. These people are the “co-applicant” and the “authorized user.” Client I encounter in Orlando, Florida, often ask me if they are personally liable for someone else’s credit card when they have themselves previously used the card. In bankruptcy, if a debtor is legally liable on someone else’s card is important to know in order to list the card as a debt and name the primary owner as a co-debtor. When the card is in the name of a non-filing spouse the filing debtor’s liability is even more important to determine if the debtor may exempt property owned jointly with the non-filing spouse as tenants by entireties property. A debtor can claim tenants by entireties exemption only if he and his non-filing spouse have no joint unsecured liability.

Simply, if you provided your social security number, income, and other financial information in the course of applying for a credit card then you are a co-applicant. Co-applicants are personally liable for all charges on the credit card. If your spouse applied for the credit card and was approved for the card on his or her own financial information and credit, and after receiving the card in the mail your spouse added you to the account then you are an authorized user. Authorized users are not personally liable for credit card charges.

Credit card companies clearly explain the difference in their pre-recorded disclaimers during the card application process. I personally applied to a Capital One credit card this month to take advantage of a targeted awards promotion. After I received the card I called them to add my wife as an authorized user. Being an attorney, I carefully listened to Capital One’s legal disclosure statement during the telephone call. The recorded statement clearly explained that authorized users are not personally liable for charges on the credit card.

The legal difference between a co-applicant and authorized user is confusing, but the credit card companies try to explain the legal difference during the card application process. Try to listen for the explanation next time you add someone as a user to your credit card.