Worst New Trend; Paid Co-Signers

A few weeks ago, I wrote about how college students were trying being circumvent the new CARD Act rules for credit card holders under 21.    Today, I just saw this article about how college students skirt to get credit cards. Apparently, they are actually paying other people to be co-signers.  This is just a terrible idea on so many levels.

For The Underage Applicant

There is a reason that the CARD Act was created with the restrictions against giving credit to those under 21 without the ability to pay their bills. Giving someone money that they can’t pay back used to be known as loan sharking.   The idea is that you squeeze the borrower, who then goes out to family and friends to pay back the loan.   The mob merely uses violence, while your credit card company will use collection agencies and the courts.    So the solution, for some people, to this very wise safegaurd against predatory lending is actually paying someone to co-sign your credit card application?!   Now, you have a loan that you can’t pay back, and you are making another person responsible for your debts.   When collections and the courts goes after that person, who do you think they are going to call first?

Clearly, if you do not have a means to pay back your debts, you shouldn’t incur them in the first place.  Otherwise if you have to have a credit card, and you really do have a friend or family member who is prepared to bail you out when you get in over your head, you should ask that person.  Personally, I think co-signing is a bad idea in general for all but married couples.  People who have no income should be happy with a debit card.   If you really desire the protections that a credit card offers over a debit card, perhaps a secured credit is the solution.

What About Person Being Paid To Co-Sign

If anything, this person is the more foolish party.  Sure, they are making a few quick dollars for signing their name.   In return, they are liable for a stranger’s debts forever.   What a deal.    If that person is less than reliable or reputable, they could easily rack up thousands of dollars of charges, interest, and fees that they are responsible for.   As bad as that sounds, the debt may be the least of their problems.   As soon as the card holder misses a payment, their credit will suffer.   This will hurt their ability to get credit cards, car loans, mortgages, and perhaps even a job.   Co-signing a credit card application is very likely to turn out to be the worst decision they have ever made.   Even if you were to be paid more than the entire amount of the possible debt, the potential damage to your credit makes this the worst possible decision you could ever make.

I don