Credit cards are revolving credit accounts that allow great freedom for making purchases. As the cardholder, you can use the credit line at your discretion, but you are also responsible for repaying the bill. Card issuers provide repayment options, according to the Federal Reserve Bank of San Francisco, but you cause negative consequences to your credit rating if you do not fulfill the financial responsibility.
The credit card holder is a person who applies for a credit card account or redeems a pre-approved offer to obtain one. The cardholder's name appears embossed on the credit card and the billing statements. The credit card account information shows up on the cardholder's Experian, TransUnion and Equifax credit reports, the Federal Reserve Bank of San Francisco explains, including current balance, total credit line and payments. Negatives, such as credit cards charged off as bad debts or court judgments for unpaid accounts also appear on the reports.
You become a credit card holder by filling out an application, either online or on paper, and submitting it to the card issuer. The application asks for personal and financial information, including your name, address, income information, other credit cards and bank accounts. The card issuer evaluates the information, checks your credit reports and decides if you are a good risk for a new account. You receive a credit limit and a card with which to access it upon approval, thus making you a cardholder.
Being a credit card holder helps your credit rating if you use the account responsibly by keeping your balance low and always paying the bill on time. Credit cards are also important to credit rebuilding after financial problems, since lenders want to see a good current payment history. Secured credit cards are alternatives when you do not qualify for traditional accounts. You can become a secured cardholder by saving up at least $200 to $300, depositing it with a bank, and getting a card with a credit limit based on that deposit, Leslie McFadden of Bankrate.com explains.
Cardholders can add authorized users to credit accounts, which allow designated individuals to receive a card of their own for charges on the account. Authorized users have no legal repayment obligation. Consequently, never give someone access to a credit card account if you are unwilling to pay the bill if they refuse to reimburse you. Individuals can also co-sign for another person's credit card if his credit rating is not strong enough to qualify for the account, according to MSN Money. While the other person is the primary card holder, you are fully responsible for the bill if they default. The credit bureau reflects this credit line on your report.
- Federal Reserve Bank of San Francisco: Credit and Charge Cards, What Consumers Should Know about the Cost and Terms of Credit
- Federal Reserve Bank of San Francisco: Your Credit Report, What it Says About You
- Bankrate.com; Secured Credit Cards Harder to Get; Leslie McFadden; March 2009
- MSN Money; Should You Co-Sign for Your Parents?; February 2011
- Jupiterimages/Brand X Pictures/Getty Images