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Supplementary Credit Cards and Bankruptcy

Many financial institutions and big box retail outlets encourage their cardholders to obtain a supplementary card for their spouse or partner. One is encouraged to do so to increase the accumulation of reward points, enable a streamlined accounting of purchases and the convenience for the family of having to manage only one account.

There are however drawbacks to this practice:

  • For example, when you are traveling and the main cardholder’s account/card is compromised, both cards may be cancelled and you are left without a credit card to use on your vacation;
  • If there is matrimonial breakdown and the spouses split, the institution will seek payment from both parties until the balance due is cleared. Contrary to popular belief, if the supplementary card holder uses the card there is an automatic implied undertaking by the supplementary card holder to be responsible for 100% of the balance due;
  • A Separation Agreement or Divorce Agreement that indicates one spouse is responsible for the balance due on the card does not in itself bind the financial institution. Many people are surprised to find they are still responsible although the agreement may state otherwise. In this situation one must bring the accounts to zero and then formally request your name be removed from the card. This may result in the card being cancelled as the ex-spouse may not meet the financial hurdles set out by the institution;
  • People are encouraged to carry a credit card from the same financial institution that manages all other personal financial transactions. Should a dispute arise with respect to any purchase or error on your account that is not resolved on a timely basis the financial institution may take matters into its own hands and withdraw the funds to satisfy the balance due. This may result in other complications depending upon your own cash flow requirements.

A wise Tax Professor once suggested to his students that one should carry a card from one financial institution and have all of your banking with another in order to keep your accounts separate.