I’ve long said that there is no credit card for which a real, live human being isn’t liable.
(That may be an exaggeration, but not by much.)
And I’ve long worried about the prospects for success of business startups financed on credit cards.
But I’ve never seen a departing employee of a start up stuck with the bill for charges made by management after he left, until now.
He thought the card (and the balance owed) belonged to the business and he left it behind when he took a new job.
Eighty thousand dollars in charges later, he found he was on the hook as far as the card issuer was concerned.
It was a Silicon Valley horror story.
So, let’s review how this happened and what to learn from it. Because this won’t be the last time that departing employees have gone out on a financial limb for a new venture that fails.
Who’s liable for the business card
While the card issuer may be willing to emboss the business name on the card along with yours, dollars to doughnuts, YOU are the only one legally liable to pay the bill.
Unless the card application calls for the signature of an officer of the business entity, the bank is extending credit to an individual who signs the application.
The business name on the plastic may make you look more “professional” or make it easier to sort business from personal expenses, but the legal liability lies with the named individual.
How management got free money
In a world of on line purchasing, possession of the card was probably sufficient to let the remaining employee charge more stuff. When was the last time a signature was required for online use?
Maybe, the remaining employee genuinely thought the card was business property.
Or maybe not, given the nature of the purchases.
But my client left the card behind, without thought, until the collectors came calling.
Your exit strategy
Cutting ties to an employer should henceforth include cutting up the credit card. Or more specifically, calling (and writing) the card issuer, closing the account.
Close the account, too, if the rupture is marital; don’t let more debt accrue
Closing the account doesn’t eliminate your liability for any outstanding balance, but it does prevent further use of the card.
And if the shoe is on the other foot, and you are the remaining employee and your company is actually liable on the account, close it when the named employee leaves.