What Is An Authorized User On A Credit Card? (Understanding The Pros And Cons)

A credit card authorized user is someone who is added to another’s credit card account and receives a card of their own to make purchases, but aren’t liable for payments.

Authorized users have legal access to use a cardholder’s account, including making purchases. 

They receive a linked credit card, but the account’s primary holder maintains responsibility for all account payments.

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KEY TAKEAWAYS:

• The primary account holder must grant access to authorized users.
• Unlike joint account holders or co-signers, authorized users are not legally responsible for charges they incur.
• Adding a family member as an authorized user is an easy way to help them build credit and learn responsible credit management skills.

If you have a credit card, you have the option to add an authorized user to your account. Doing so is an excellent way to help family members, especially teens, build credit and learn responsible credit management skills. 

However, before you add an authorized user, it’s important to understand the process, your responsibilities as the account holder, the authorized user’s responsibilities, and the impact it can have on your credit score. 

What Is An Authorized User?

Authorized users are individuals who can access your credit card balance and make purchases with their own card. The primary account holder must provide the authorization and can revoke access at any time. 

Authorized users are not legally responsible for repaying their purchases; that liability remains with the account owner. 

It is possible to appoint an authorized user as the accounts manager, which would allow them to redeem rewards, report issues, and track purchases. 

It is crucial to ensure you and the authorized user understand your individual responsibilities regarding credit card usage and repayment to avoid missed payments and excessive expenditures on the account. 

Who Can You Add As An Authorized User?

Deciding who to add as an authorized user on your credit card account is dependent on two factors: your credit card issuer and your judgment as the account holder. 

Some issuers may have restrictions on who you can add or age requirements, so be sure to read all rules before proceeding. If there are no restrictions, who you add to the account is your decision. 

Trusting the individual as an authorized user is essential since once they receive their card, they can use it with or without your permission until you revoke access. 

Maintaining open dialogue concerning all expenditures and setting a predetermined budget is the best way to avoid uncomfortable issues concerning purchases in the future.

The Pros And Cons Of Authorized Users

When considering adding an authorized user to your account, consider the advantages and disadvantages first.

For the cardholder, the advantages of having an authorized user provides simplified finances for couples or families, easily earns more rewards on applicable cards, helps a loved one build credit, and teaches teenagers and young adults about money management. 

For the authorized user, the advantages are the ability to build credit quickly off the primary cardholder’s expenditures, gain access to an established credit card, avoid high interest rates, and learn credit management skills. 

While there are many advantages to adding an authorized user, it’s important to understand the disadvantages as well. When money is involved, it’s easy to have disagreements over spending habits, which can create a strain in the relationship. 

Irresponsible usage can be a poor example of healthy credit management skills, which can lead to issues down the road. 

Additionally, and arguably most importantly, authorized users can impact both the primary account holders’ credit score and their own, which can result in higher interest rates, greater debt, and fewer borrowing opportunities in the future.

How Becoming an Authorized User Affects Your Credit

Many people choose to add an authorized user to their account to help build the individual’s credit, but if the credit card company doesn’t report their activity, it won’t have any effect. 

The card issuer isn’t legally required to report authorized users to the top three credit bureaus, and if they don’t, the information won’t appear on their credit report. 

Without this data, the user’s activity won’t impact their credit score. You can reach out to your credit card company to see if they report this information and request that they do. 

If both the primary account holder and authorized user use their cards responsibly, both will experience positive effects on their credit score. Habits like retaining a low balance and making consistent monthly payments are the best ways to increase your credit rating. 

Your credit score is based on long-term usage, so the more responsibly you use your card, the better it will be. 

Can Authorized Users Negatively Impact a Primary Cardholder’s Credit?

Irresponsible credit card usage will have a negative impact on the primary account holder’s credit. Since the authorized user isn’t a joint account holder or a co-signer, they are not legally responsible for the charges they incur. 

It falls on the account’s owner to maintain consistent payments and ensure the authorized user acts responsibly. 

Ensuring you explain proper credit management habits, including factors like the impact of your credit utilization ratio and responsible spending, can help ensure the action mutually benefits both parties.

Adding an Authorized User

Adding an authorized user is done through your credit card issuer. 

Each company has its own process, with some allowing you to add and remove users online and others requiring you to contact a customer service member. 

You will need information on the user, including their date of birth, social security number, and address, to complete the process. Once complete, you can choose their level of access and monitor their expenditures. 

FAQs About Authorized Users On A Credit Card

Can I add multiple Authorized Users to my account?

Each credit card issuer has its own policies regarding the number of authorized users you can add. Contact yours to see your allotted amount. 

What can I do if an authorized user overspends on my account?

If the user overspends, you can remove access to your account and close their card. 

If their spending significantly increased your balance to a point where it has become unmanageable, you can pursue debt relief or consolidation options to lower your interest rate and monthly payment.

Is an authorized user responsible for my debt if I die?

In most cases, authorized users aren’t responsible for the outstanding debts of the deceased primary account holder.

Some Final Thoughts About Authorized Users On A Credit Card

Adding an authorized user to your credit card account can be a great way to help family members, especially teens, build credit and learn responsible credit management skills. 

But it doesn’t come without risks that you should be aware of before granting such authorized use of a credit card.

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