Can My Friend Help Me Meet My Credit Card Bonus Spend?
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“Reader Questions” are answered three days a week — Mondays, Wednesdays and Fridays — by TPG Senior Writer Julian Mark Kheel.
Today’s question comes via an email from Daniel, who wrote us to ask…
I have a friend who has offered to put $15,000 of his business expenses on my Amex card (and reimburse me) so that I can meet a minimum spend. Would this be against Amex’s terms and conditions?TPG Reader Daniel
Well, Daniel, you have a very nice friend… or you may end up being a very nice friend to your friend… or you may end up not being friends at all depending on how this all works out.
Let’s start by answering your basic question. Having someone else put their charges on your Amex card — or almost any credit card — is perfectly fine from the standpoint of a credit card’s terms and conditions. The proper way to do it is to get an authorized user card issued in your friend’s name from your account. Purchases made with an authorized user card generally count toward the minimum spend for earning your sign-up bonus, and by having an authorized user card, your friend can make his charges without needing your personal authorization each and every time.
That’s the good news. Now let’s talk about the significant risks of doing this.
When you allow someone to make purchases on your credit card — with or without an authorized user card — you’re accepting legal responsibility for those charges. That means if your friend doesn’t pay you back, you’re on the hook for every penny of it. Your credit card company doesn’t care what arrangement you might have made with your friend and will look to you personally to pay the bill. If you don’t pay or can’t pay, it will count against your own credit rating and the credit card company can (and will) pursue you personally for the debt.
Also, in this case, since your friend is charging business expenses, there could be tax ramifications and concerns about commingling funds. If you proceed down this road, both of you should double-check your plan with your accountants and keep extremely detailed records, in case the IRS comes asking who paid what and who owes what on his taxes. You also might have to pay an additional fee for adding the authorized user, depending on which credit card you have.
Given all these hazards, this is not a path I would recommend for such a substantial amount of money. However, if you’ve considered all the dangers and still want to proceed, there are a few precautions you can take to protect yourself. Keep in mind that I’m not an attorney and this is not legal advice (trust me, you wouldn’t want my legal advice anyway), so if you do this, you’re proceeding at your own risk.
Ideally you’ll want to get the reimbursement funds from your friend up front before any charges are made, though that requires your friend to have the same level of faith in you that I’m recommending you not have in your friend. Regardless, you should get the agreement with your friend in writing so there’s no doubt as to the arrangement. Also, with American Express you have the ability to limit the amount of credit extended on each authorized user card. Since we’re talking about such a large amount, limiting the charges to just a portion of the total to start and then getting the money reimbursed from your friend as you go might be a safer way to handle this.
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