Earlier this week I applied for a charge card for my new business. As a part of the application, I was informed that I would need to personally guarantee charges, not only for my card, but also the cards of any other people under the account. Fortunately, this did not come as a surprise because I had already seen this bite unsuspecting business owners and/or executives in the past through my law practice.

In one instance I represented the vice-president of a company who was a part of a four-person management team. The vice-president was the named account holder but he thought the other members of the company’s management team were equally liable for the debts on the account. Not so. So when the company folded, the charge card company had his personally guarantee but not the personal guarantee of the other members of the management team. Naturally, the charge card company pursued only the vice-president for the debt.

In another instance, an office manager (yes, an office manager) was pursued by a charge card company for BUSINESS expenses charged when the owner of the business died without adequate funds in his estate to pay for the debts. We argued no personal guaranty existed and that the office manager had never agreed to the terms on the account but the fact that charge card company pursued her cost her legal expenses and much aggravation. 

So beware of personal guarantees on charge cards. You may be accepting more personal liability than you suspect. Always inquire when applying for a new card and make sure you understand the extent of your personal liability.