DEFINITION of 'Combined Guarantee'

A credit card agreement in which any debts accrued on the card are considered the responsibility of more than one party. Combined guarantees are most likely to be found on business credit cards since these cards are the most likely to have multiple users. Credit card companies that allow combined guarantees may require each cardholder to complete his or her own card application, and will likely conduct a credit check on each.

BREAKING DOWN 'Combined Guarantee'

When an individual or business signs a credit card agreement, the credit card company typically assigns liability for any debts incurred to the sole signatory. If more than one person signs the agreement, the card company will assign joint and several liability, meaning that each person who signs the agreement will be responsible for all the debts accrued on the card. The credit card company treats all the individuals as if they are the same, even if one person is responsible for having made every single transaction.

Businesses that use a corporate card should pay attention to whether charges on the card fall under a combined guarantee. In many cases, the business will have the option of some liability types, including limited liability and joint and several liability. Each offers different levels of risk control, and places responsibility for debts incurred on different groups. Many card issuers recommend choosing limited liability, as this does not expose the business to expenses that fall outside of what is considered acceptable under the company’s expense policy. The company would, however, be responsible for transactions made by employees who have since left the firm.

If a party that has signed the combined guarantee fails to make payments, it may be the responsibility of the other signatories to provide the credit card company with any known information about the cardholder’s whereabouts. If an individual is no longer with the company, it is the responsibility of the company to notify the card issuer that the individual is no longer authorized to make transactions.

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