Authorized Users on Credit Cards

Nov 15, 2021 2:15:41 PM

Becoming an authorized user on someone else’s credit card can help you access a line of credit if your own credit history isn’t well established. It can also make a positive impact on your credit – assuming the primary account holder is making payments on time.

Curious to learn more about what it means to become an authorized user and how it might affect your credit? Read on!

What Is an Authorized User?

In a nutshell, an authorized user is allowed to make purchases on someone else’s credit account. They can receive a credit card that’s in their own name, and is linked to the primary cardholder’s account. However, an authorized user cannot make changes to the credit card account, such as increasing the credit limit of a card or adding more people to the account.

Who’s Responsible for Making Payments?

Authorized users don’t receive a monthly statement – that goes to the primary cardholder, who can see all purchases made by the authorized user. The primary cardholder is responsible for paying off the entire balance of the card, including purchases made by the authorized user. While there may be a separate arrangement in which the authorized user refunds the primary accountholder, in terms of legal liability for payments and debt, this falls entirely on the primary cardholder.

Who Can Be an Authorized User?

Typically, authorized users are a family member of the primary cardholder. Ultimately, anyone who wishes can opt to become an authorized user, as long as the primary accountholder is in agreement! Check with you financial institution for any specific rules they may have regarding authorized users.

What’s the Impact on Credit?

When a primary cardholder and an authorized user share a credit card, the account shows up on both people’s credit history. This means that a primary cardholder’s credit score will be affected by the actions of the authorized user – and vice versa! If payments are late, or credit utilization is very high, both parties will see a negative impact on their credit.

On the other hand, if the credit card is always paid off on-time and if credit utilization doesn’t climb too high, both parties’ credit will be positively impacted. This is why parents sometimes make their teen or college-aged kids authorized users – to help them build a good credit history, before getting their own credit card for which they are wholly liable.

What’s the difference between an authorized user and a joint cardholder or account holder?

A joint account holder or cardholder has more responsibility than an authorized user. Like the primary cardholder, the joint cardholder is equally liable for any debts that accrue on the credit card. It’s also tougher to become a joint account holder – lenders will usually run a credit check before issuing an approval, and a potential joint cardholder could be denied if their credit history is less than stellar.

Should You Add (or Become) an Authorized User?

Here are a few questions to consider if you’re thinking about adding an authorized user to your credit card, or becoming an authorized user on someone else’s account:

  • Is there a risk that either person’s spending habits could negatively impact the other?
  • Will the authorized user be asked to pay back the primary cardholder for any spending? Consider how and when those payments would be made.
  • What are the advantages of the arrangement, for both parties? For example, will it enable a child to build their credit history and access a bigger line of credit in case of emergency?
  • Does your current credit card allow authorized users? Check in with customer service if you’re unsure.

Tags: Credit Cards