In general, co-signing on a credit card is not a good idea. If the first responsible party defaults on the debt, you will be held liable for repayment. However, there are times that offering up yourself as partially responsible for the line of credit is needed.
Many first time borrowers, such as college students, may not be able to obtain a line of credit without their parent’s help. Rather than risk having your son or daughter get into debt over a sour credit card deal, co-signing on a better line of credit may be a good investment in their financial future.
Sharing Is Caring
Since you will be sharing responsibility for any debts that accumulate on a shared line of credit, there are a few ways to protect yourself from any negative outcomes.
The most important aspect of co-signing for a credit card is to make sure the line of credit is used wisely. It is easy for purchases to add up and the bill become overwhelming. Set purchasing rules for the card and allow your son or daughter to participate in the process of developing these rules. Working together on how and when the credit can be used will provide a valuable teaching opportunity.
Conduct regular meetings about the status of the credit account and discuss any problems or concerns. Together you can review purchases, payment history and plan for any large future purchases. These meetings will allow you to guide your son or daughter into financially healthy habits that can positively influence the rest of their financial life.