Should You Let Someone Else Balance Transfer Onto Your Credit Card?
The option to help out a friend or loved one might be even more tempting when you’ve got a credit card that has a balance transfer promotion.
A balance transfer credit card is a card that features (either as a standard feature or as a temporary promotion) a low or even zero-interest rate for a set period of time for any amount you transfer over from another credit card. Often, there is also a fee to make the transfer, averaging about 3% of the transferred amount.
However, there are still quite a few recommended balance transfer credit cards that offer a temporary promotional low interest rate or even 0% interest rate. A balance transfer credit card like this could potentially save your friend or family member hundreds if not thousands of dollars if handled responsibly.
It’s the “if handled responsibly” that’s the sticking point. Remember that once the promotional period ends, the interest rate reverts back to a standard credit card interest rate, which in Canada averages about 20%. That interest can add up very quickly! If you transfer someone else’s balance over to your card and they don’t pay off their debt before the promotional period ends you would be stuck with credit card debt and a broken relationship. Before you make the move to allow someone to transfer debt onto your credit card, make sure you carefully consider how it works and the pros and cons.
In This Article:
How to Transfer Another Person’s Balance to your Credit Card
Step 1: Check If You’re Eligible for a Balance Transfer
Before you even consider allowing someone to transfer a balance onto your credit card, you will first need to contact your credit card provider to ensure that they allow cardholders to transfer a non-cardholder’s balance onto their card. Not every credit card provider in Canada allows it and it’s really up to each individual credit card company. Some may only let you transfer someone else’s balance if they are a secondary authorized cardholder. In this case, you could be on the hook for an additional card fee. Also, be aware that the secondary cardholder isn’t legally liable for any charges or unpaid balances on the card; in Canada, the primary cardholder is held responsible. So, if you decide to go the secondary cardholder route you would need to be 100% confident that your friend or family member can manage credit card debt responsibly.
Step 2: Initiate the Transfer
If you are allowed to transfer someone else’s balance onto your card, then the next step is to contact your credit card provider to initiate the transfer. You’ll need to provide info like your friend’s credit card account number and how much they want to transfer. It’s possible that the credit card company may only approve part of the amount. It can take several weeks for the transfer to go through.
Step 3: Make Payments on the Balance
Once the transfer is successful, you’ll then need to start making payments. It’s up to you how you’ll work the payments out with your friend or family member. It’s imperative to have a payment plan laid out before you begin so the person in question knows what is expected of them. There are lots of things to consider. Do you want them to make payments to you directly every two weeks or once a month? What is the latest date on which they must pay off the balance owing in total? What happens is they don’t pay off the total?
These are questions that must be answered before you initiate the transfer. Of course, these questions highlight just how complicated and stressful it is to arrange for someone to use your balance transfer credit card, which brings us to why you may not want to go ahead with it after all.
What to Consider Before Someone Else Transfers a Balance Onto Your Credit Card
You Would Be Responsible for Their Debt
No matter how much someone else promises that they will pay down the credit transfer debt, in the end, you are responsible for paying off their balance in full if they don’t. The credit card company won’t care at all about any promises someone else made about repayment, they will just want their money back. Because your name is on the credit card, you’ll be the one they go after for the debt.
If you’re thinking about letting someone transfer a balance to your credit card, it’s vital to write out a plan or contract that will cover every part of the arrangement. You need to cover things like the payment plan, payment amounts, and the final due date, as well as any transfer fees or additional interest payments. This will ensure that you are both on the same page about amounts owing and payment plans, as well as what happens if the debt is not paid.
If you do decide to go ahead and set up an official agreement, never agree to transfer more money than you feel comfortable with or (worst case scenario) that you can’t pay back on your own if your friend defaults on payments. However, even if you have a thorough document that details your agreement and payment plan, keep in mind that it will still be uncomfortable to enforce it.
It Could Negatively Affect Your Credit Rating
Not only could you be responsible for the person’s debt, but you could be putting your credit score at risk by letting someone else transfer a balance onto your credit card. Remember that payment history makes up the largest part of your credit score (35%) so if you miss even a single payment, your credit rating could decrease. Your credit utilization ratio, another big component of your credit score, will also be negatively affected when you carry a larger balance.
Furthermore, the longer you take to pay off the balance, the lower your credit score will fall and it could take years to get it back up to where it was. A low score could have serious ramifications on the rest of your life, including your ability to rent or get a mortgage, apply for credit cards, or even get a job.
Negatively Affect Friendship or Family Relationships
Personally, when it comes to large sums of money, I am one of those people who try as much as possible to adhere to the adage: neither a borrower nor a lender be—especially when it comes to loved ones. If it’s a small amount of money, I would rather give it to someone than loan it to them, quite frankly. That’s because the fallout of an unpaid loan or balance transfer is so much more complicated and can affect so many different facets of your life when it involves someone you’re close with.
Consider how stressful it is if the person is forgetful or not well-organized and you have to keep reminding them to make payments. Are you going to really feel comfortable constantly reminding someone to make payments? Additionally, the person you using your balance transfer credit card may also feel uncomfortable with you because they’ll be thinking of the money they owe you every time you hang out.
If the person in question doesn’t pay you back, you take on the debt and your credit score takes a hit, then your relationship could be irreparably damaged. In Canada, you have the option of taking someone to small claims court (in Ontario, for example, small claims courts handle civil disputes of a value of up to $35,000). Doing so would be frustrating, time-consuming, and will still likely mean the death of your relationship. Plus, it would cost you several hundred dollars to file your claim. Even though your intentions are good, you really are risking so much by offering to let someone else transfer a balance onto your credit card, so be sure it’s worth the risk.
Alternative Options to Consider
Clearly, you are putting a lot at risk when you offer to let someone else transfer a balance onto your credit card. There are a few other avenues to explore before resorting to transferring a balance to your credit card:
- Learn to manage debt: It might be wiser to steer your friend or family member towards a way to deal with credit card debt that doesn’t involve you.
- Apply for a personal loan: You might suggest that they get a personal loan to help manage their debt.
- Get a debt consolidation loan: A debt consolidation loan is specially designed to help a person tackle credit card debt.
It’s important to keep in mind that there are other options out there to deal smartly with credit card debt that might be better (and have less emotional repercussions) in the long run than using your balance transfer credit card.
Deciding to let someone transfer a balance to your credit card is a huge gamble that could have long-lasting personal and financial ramifications. Even if you trust and love the person, things happen and it’s a real possibility that you could get stuck with the debt. If you do decide to go forward, at the very least protect yourself by having a repayment plan in writing that documents every aspect of payback and how a non-payment will be handled.