I am on my 21 year old son’s checking account for emergency backup
only. I don’t keep up with his account nor use it but the bank said it was
best to have someone who could access it in case of emergencies. My
question is…he is fairly frequently bouncing checks and doesn’t worry
about it since he has overdraft protection, but will this hurt my credit?
He doesn’t live at home but his bank mail still comes to our house. 
Diane

What’s the old saying? A mother’s work is never done. Seems like that
might be the case here. Diane is right to be concerned. If she’s not
careful her son could cause her serious financial grief.

Diane will need to find out exactly how she’s ‘on his account’. There
are two different ways and they have drastically different consequences.

She may be on the account for check-writing purposes only. That would
make her an ‘authorized user’ of the account. She would not be
responsible for the account or any checks that are bounced.

The other way that she could be on the account is if it’s a joint
account. In that case she’d be every bit as responsible for the account as
her son. And, any bad marks would belong to her even if her son wrote
the bad check.

Incidentally, the same thing is true on credit cards. In fact, it’s
more dangerous there. At least in a checking account your partner can’t
run up a bill. They can only bounce checks and trigger fees.

The overdraft protection will help protect his credit score. Since the
bank is honoring his ‘bad’ checks, the bills are still being paid. As
far as the utility company knows, they’re being paid on time. So there’s
nothing bad to report.

But that doesn’t mean that Diane’s son has found a fool-proof way to be
irresponsible.

Her son should learn about something called a ChexSystems report. It’s
used by the banking industry to check you out before you open a new
account. If you have too many problems, they’ll refuse you as a customer.
And, it’s also possible that his current bank will close his account if
he continues to write bad checks.

Counting on overdraft protection can also get expensive. Expect to pay
about $30 for every check that would have bounced. Expensive if you’re
bouncing more than the occasional check. In addition, some banks charge
you a fee for every day that the account is overdrawn.

Diane may want to talk with her son. Regularly depending on overdraft
protection is not a good idea. At best, it’s a waste of money. At worst,
it’s a sign that he’s not paying attention to his finances. Chances are
that soon, if he’s not already, he’ll be in trouble with his credit
cards and auto loan.

One way that Diane’s son can minimize the damage is to try to arrange
to have his checking account linked to a credit card with the same bank.
Instead of overdraft fees, he’ll be charged for cash advances and
interest. But it might be cheaper than the overdraft fees.

He could also link his checking account to a savings account or a line
of credit. This option probably isn’t available to him. If he’s having
trouble with bad checks he probably doesn’t have a savings account.
And, he’ll have trouble getting a line of credit without a home or some
other asset to secure it.

Diane also asks about her son’s business mail. It really shouldn’t make
any difference. Just because her son chooses to have his mail delivered
there, that doesn’t obligate Diane to pay any of his bills.

If her son is falling behind in his credit card bills, she can expect
to start getting collection calls. Collection agencies can be
aggressive. Legally they can’t threaten. But, in reality some do. Even if she’s
not liable for the bills, that probably won’t stop the calls. As long as
the collection agency thinks that she may help them get the money
they’ll continue to call.

The best way to stop the calls, is when they call to tell them that
she’s demanding that they obey federal law and stop calling. Then follow
that up with a letter saying the same thing. Send it certified with a
return receipt.

It’s important for Diane to find out whether she’s a joint owner of the
checking account. Or simply an authorized user. If she’s joint on the
account, she needs to get off immediately.

She’s right to be concerned about her credit rating. A low score can
affect your mortgage interest rate, credit card interest rate and your
ability to get a job or an apartment. Hopefully Diane’s son will use
these overdrafts as an early warning sign and make changes to avoid more
harmful financial behavior later.
______________

Gary Foreman is a former financial planner who currently edits The
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