You might have a friend or family member who is experiencing some trouble with their high-interest debts. In this case, you may consider helping them by allowing them to balance their debt onto your credit card. This may be especially helpful for the other person if your card’s rate is relatively affordable compared to theirs.
But is this a good idea? After all, it can put you in a risky situation, especially if the other person fails to help keep up with payments.
So, should you extend some help to a friend or member of your family to allow them to transfer their credit card balance over to yours? Let’s take a closer look at this arrangement to help you decide if this is the right thing for you to do.
Key Points
- Allowing another person to transfer their credit card balance to your account comes with risks.
- A higher credit utilization ratio and failure of the other person to pay their balance are some of the bigger risks associated with letting someone else transfer their balance to your card.
- Other alternatives may be available, such as opening a joint account or offering a direct loan to the other person to help them consolidate their high-interest debt.
What Is A Balance Transfer?
Balance transfers let you move your debt between different accounts. They’re meant to help consumers get rid of their high-interest debt and take advantage of a lower rate to save money. Balance transfers are also useful for consolidating several debts into one simplified payment.
Can You Transfer Debt From One Person To Another Person?
Debt is generally tied to the individual’s credit profile and their agreement with the lender. That said, there are a couple of ways that a balance may be transferred from one person to another:
Joint Accounts
If you currently hold a joint account with another person, you both share the responsibility of paying down the debt, along with any balance that is transferred onto it. You can either apply for the joint credit card account together at the same time, or you may add the other person after you’ve applied for the account.
Banks will typically allow account holders to transfer debt to the other person’s new credit card account, though this will ultimately depend on the type of account you intend to use for the balance transfer.
Learn more: Pros and Cons of Joint Bank Accounts
Balance Transfer Between Two People
To transfer another person’s credit card debt to your credit card account that you do not hold a joint account with, your name would replace the other person’s name from the debt. When this happens, you will be solely responsible for paying the debt, since your name is now tied to the debt.
Keep in mind that not all credit card issues allow this type of transfer, so you’ll need to check with yours before considering this option
Adding Someone As A Secondary Cardholder Vs Joint Cardholders
There’s a difference between secondary and joint cardholders, which is important to understand. This is because it can affect your balance transfer options and legal rights when debt is shared or transferred.
The following table illustrates the difference between the two:
| Joint Cardholders | Secondary Cardholders | |
| Applying for a Card | Two people applied for a credit card with both cardholders’ names on the account and both are responsible for the debt. | One person applied for a credit card in their name who shares the account with another person. |
| Control Over Account | Both cardholders can make changes to credit limits, freeze the account, or close the account. | Only the primary cardholder can make changes to credit limits, freeze the account, or close the account. |
| Income and Credit Scores | Both partners earn a regular income and have good credit scores. | Only the primary cardholder is required to have a regular income and good credit score. |
| Debt Payments | Both cardholders are responsible for all transactions and debt payments. | The primary cardholder is solely responsible for all transactions and debt payments. |
| Account Closures in the Event of Divorce or Separation | Both cardholders must agree to close the account. | The primary cardholder may close the account without the consent of the secondary cardholder. |
Risks Of Letting Someone Else Balance Transfer Onto Your Credit Card
While allowing another person to transfer their debt onto your lower-rate credit card may help them save money, there are risks you may be faced with that should be considered:
Your Credit Score May Be Negatively Affected
If you allow someone to transfer their debt to your credit card, your credit rating could be negatively impacted. Payment history is a significant factor that impacts credit scores, so even one missed payment can hurt your credit rating.
Your credit utilization ratio can also suffer, which also plays a role in credit scores. If you carry a larger balance, your ratio will increase, which is not a good thing for credit scores. Further, the longer it takes for you to reply to the balance, the more at-risk your credit score will be.
You’re Responsible For Someone Else’s Debt
Taking care of your own debt can be challenging enough, but being responsible for someone else’s debt is another story. If the other individual does not pay the debt in full like they’re supposed to, you will be on the hook for paying it off. Since your name is on the credit card account, the credit card issuer will come after you for the money if they can’t get it from the other person.
Your Relationship May Be Negatively Affected
Money is one of those topics that can cause a rift between friends and family. If you shift the responsibility of paying the debt to another person who doesn’t follow through with their obligations, this can cause issues between you and the other individual. Consider the potential negative effects of your relationship if the other person does not hold up their end of the bargain after a balance is transferred.
Learn more: How Living Common-Law Affects Your Finances
Tips For Letting Someone Else Transfer A Balance Onto Your Credit Card
To avoid any of the potential issues just mentioned when transferring a balance from one person to another, consider the following tips:
- Discuss Expectations. Before you add a secondary cardholder or apply for a joint account with another person, make sure you’re both on board with making timely payments. Discuss how and when payments will be made before applying for a new credit card or transferring a balance to avoid any potential payment issues.
- Make Sure Balance Transfers Are Allowed. Before you make an attempt to move debt from one account to another, make sure the account you plan to open allows such a transfer to be made. Verify these details with your credit card issuer first before you open a new account or apply for a transfer.
- Consider Balance Transfer Fees. There may be a balance transfer fee applicable to the transaction, which may vary among credit card issuers. Generally speaking, balance transfer fees range from 3% to 5% of the balance.
- Review Terms And Rates. Low balance transfer interest rates are usually only offered for a temporary amount of time, after which the rate will increase. Find out how long the introductory is good for, and what the rate will be once that period is over.
Alternative Options To Letting Someone Else Balance Transfer Onto Your Credit Card
Given the risk that comes with letting someone else transfer their debt onto your credit card, consider other alternatives first:
- Personal Loan. The indebted person may find that taking out a personal loan can help them pay down some of their higher-rate debt to get their finances under control.
- Co-Sign A Loan: Consider offering to co-sign a loan for the other person, which can provide funds without the need to transfer debt onto your card. Keep in mind that by co-signing, you’ll be responsible for the debt if the other person defaults on the loan.
- Offer A Direct Loan. Rather than allowing another person to transfer their balance onto your credit card, consider loaning them money instead. Keep in mind that you will be entrusting them to repay the money you’ve loaned out. If you feel comfortable doing so, you may want to draft up a contract with the terms of the loans, including any applicable interest rate you may want to charge and when you expect the funds to be paid back.
- Open A Joint Account. Consider opening a joint credit card account with the other person where you’re both responsible for the debt.
- Speak With A Financial Expert. Financial advisors can help consumers get a handle on their finances and help them come up with a budget that will help them steadily pay down their debts in an effective and efficient manner.
Final Thoughts
You may want to lend a helping hand to someone you know who’s struggling with high-interest debt by letting them transfer their balance over to your credit card. But while your credit card issuer may allow it, there are also some risks that may come with it. Be sure to weigh the potential drawbacks before agreeing to this arrangement, and have an in-depth discussion with the other person to make sure they’re on board in terms of keeping up with their responsibilities.
