I’m addicted to using my law firm to earn points and miles on our credit card expenditures. On top of that, I love getting the signup bonuses.

To further my addiction, I signed my wife up for cards after I’d used up all the offers in my name. She was promptly approved for cards with Chase, American Express, and others.

The fact that she was approved only gets interesting if you know that she hasn’t earned any significant income in more than two decades. Her applications were instantly approved online as she hit the “apply” button.

So with no income, she was approved for credit. That’s interesting, but what does it have to do with your practice?

Everything.

The Red Flag of Credit Denial

Sometimes you extend credit to your clients. You’re either arranging payment plans or allowing clients to exceed their trust account balance and pay over time.

You’re doing it with the belief that these folks will pay. You’re doing it because they claim they’re tapped out and they can’t get additional credit, so you do what you have to do to keep the case moving.

How credit worthy are these folks? Are these people to whom you should be lending money?

If the credit card people will extend credit to my wife, why won’t they extend credit to your clients? It’s pretty clear that the credit card companies will give credit to just about anyone. Why not your clients?

The answer is that the credit card companies know better than to lend to some of your clients. They know these people aren’t credit worthy. The credit card companies are smart. They’re in the business of evaluating the likelihood of repayment. When they won’t give someone credit, it’s because the person isn’t likely to pay.

If credit card companies deny credit to people, it’s because there is something wrong. There’s a good reason they aren’t loaning them money. They know better than you and me: they’re the experts. Take the hint and don’t lend money to someone a credit card company considers a bad risk.

When your clients ask for credit, you should refer them to a lender. Let them apply. Let the lender decide. If the lender refuses to extend credit or sufficient credit, then you should heed the warning and refuse to extend credit as well.

If the credit card company won’t do it, why should you?