Understanding exactly what it means to be an authorized user on a credit card account is important for both the cardholder and the credit card authorized user. There are some rules and restrictions involved, but in general, becoming an authorized user on a solid cardholder account can help build an authorized user’s credit history and potentially boost their score. However, it is the primary cardholder who is responsible for the debt.
Here’s what you need to know on this topic, including the process of adding an authorized user to a credit card.
What Is an Authorized User?
An authorized user is someone that the primary cardholder — the individual who owns the credit card account and is responsible for charges to the card — has authorized to use their card. Some points to know:
• Unlike a primary cardholder, an authorized user on a credit card is not subject to credit checks and other credit card issuer requirements in order to use the card. However, the individual — who is often a spouse, child, or other family member — must meet the card issuer’s age requirements.
• The primary cardholder may have to pay a fee to add the authorized user. The number of authorized users allowed on each card varies depending on the credit card issuer.
• An authorized user may get a card with their name and the primary cardholder’s account number on it that they can then use. Or, they can simply use the primary cardholder’s card to make purchases.
• Authorized users may have access to the cardholder’s account information, such as their credit limit, available balance, and fees. They can make payments, report lost or stolen cards, and initiate billing disputes.
• However, and this is important, any charges made by an authorized user are ultimately the responsibility of the primary cardholder. Authorized users also generally can’t close an account, add another authorized user, or change the card’s PIN, credit limit, or interest rate.
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Responsibilities of an Authorized User
Even though authorized users are allowed to make monthly payments, they’re not responsible for payments — no matter how much they may have spent on the card. Rather, the responsibility of making on-time monthly minimum payments always falls to the primary cardholder.
In many cases, primary cardholders will work out some type of payment system under which an authorized user can reimburse the primary cardholder for their share of the bill. With this system, the primary cardholder can keep track of credit card charges and more easily spot unusual or potentially fraudulent activity on the card as well as credit card chargebacks.
Additionally, a system can ensure payments are made on time and that any spending on the credit card is done responsibly.
In other cases, authorized users may make their payments directly to the credit card issuer. With this arrangement, however, the primary card holder still holds the ultimate responsibility of making the minimum monthly payment on time.
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Authorized User vs. Joint Credit Card
It’s easy to confuse authorized users with joint credit card holders. But there are some key differences between the two.
• With a joint account, both cardholders are legally responsible for making payments. With an authorized user, only the primary cardholder is responsible for the debt.
• Joint cardholders also must meet credit card issuer requirements, such as a minimum credit score, and go through the application process in order to get the card. This is not true for joint holders of a credit card.
• Joint accounts are commonly used by partners who share their finances. Not all credit card issuers allow joint accounts though, and they are becoming less common. Authorized users, however, are more widely accepted.
Benefits of Having an Authorized User on Your Credit Card
There are compelling reasons why you may want to either become an authorized user or add an authorized user to your credit card account. Here are the benefits for both parties involved.
Benefits for the Authorized User
Becoming an authorized user can help someone to establish their credit and build their credit scores if the primary cardholder has a history of on-time payments and low credit utilization (in other words, not charging cards to the max). This can be especially helpful for teenagers and young adults who may not yet have had the opportunity to establish a credit record.
Most credit card issuers will report authorized user credit activity to the credit bureaus, thus building a credit history for the authorized user. The primary cardholder can check with their credit card issuer to see if authorized user’s activity is being reported and if the card issuer has all of the relevant information necessary to do the reporting.
If the issuer does report, all of the details of the card will be included in the authorized user’s credit history, including the credit limit, the amount of credit being used, and payment history.
By the same token, if the primary cardholder misses payments or makes late payments, this could negatively impact the authorized user’s credit score.
Benefits for the Primary Cardholder
Building credit for the authorized user can also benefit the primary cardholder who’s looking to help a child or other family member establish themselves financially. By helping the authorized user establish a good credit record, the authorized user will be more likely to qualify for their own credit card sooner and potentially secure lower interest rates and access to better rewards.
Plus, cardholders have the benefit of knowing that a child or other user has access to a credit card in an emergency or other situation where funds are immediately necessary.
Adding or Becoming an Authorized User on a Credit Card
Only a primary cardholder can add an authorized user to their card. To do so, you’ll generally go through the following steps:
1. Notify your credit card issuer. Let your card issuer know that you would like to add an authorized user to your card. In most cases, you can do this over the phone or by filling out a form online.
2. Have the necessary information on hand. You may need the name, Social Security number, date of birth, and contact information for the authorized user you intend to add to the card.
3. Check what will get reported to the credit bureaus. It’s important to find out if the card company will report credit information about the authorized user to the credit reporting bureaus. This will help the authorized user to establish a credit history.
4. Determine if you’ll get a card for the authorized user in their name. If so, this second credit card will get sent to you. From there, you can decide if you want to give the card to the authorized user or only have them use your card.
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Removing an Authorized User on a Credit Card
A primary cardholder can remove an authorized user from their card at any time. Simply call or go online to request a change.
Keep in mind that the authorized user may see a change in their credit score if they are removed. This is because credit score calculations take into account both the age of credit accounts and the number of open accounts, both of which may decrease when an authorized user drops off the card of someone with a more established credit history.
What Are the Next Steps After Becoming an Authorized User?
As mentioned above, authorized users and primary cardholders will want to come up with a solid plan. Specifically, they’ll want to discuss how the card can be used, how much the authorized user can spend, and when and how the authorized user will make payments (either to the cardholder or directly to the card issuer).
Making payments on time is extremely important to help avoid late fees and credit score dings for both the primary cardholder and the authorized user.
How to Monitor Your Credit as an Authorized User
If you’re an authorized user eager to build credit, it can be helpful to monitor your credit report to make sure your activity is being accurately reported. You can retrieve a free copy of your credit report each year from all three credit bureaus — Experian®, TransUnion®, and Equifax® — through AnnualCreditReport.com.
It’s also important for both the authorized user and the primary cardholder to be cautious and mindful about how their activity can affect one another’s credit, which is something credit monitoring can help keep in check. Irresponsible credit usage by either party can have implications for the credit of both the primary cardholder and the authorized user.
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The Takeaway
Authorized users are typically added to an account held by a family member or other responsible adult. They have access to the card’s buying potential, it’s the primary cardholder who is responsible for the debt. It’s important for both parties to keep in mind that while their credit usage has the potential to build their credit, it can also cause damage if payments are late or credit is maxed out.
Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.
FAQ
How many authorized users can I add to a single card account?
Each credit card issuer has different rules concerning the number of authorized users permitted. You’ll find this information in the terms and conditions for your credit card. Some credit card issuers charge a fee for each authorized user added on your account.
Is credit activity reported to the credit bureau for an authorized user?
In most cases, credit card issuers report activity to the credit bureaus for an authorized user as well as the primary card holder. Building credit in this way can be a benefit of becoming an authorized user. Check with your credit card issuer to find out if authorized user credit activity is reported.
Does adding someone as an authorized user help their credit?
Building your credit record can be a big benefit of becoming an authorized user, especially if the primary cardholder has a good credit rating and continues to make on-time payments. In order to build your credit record, however, the credit card issuer needs to report your activity to the credit bureaus.
Photo credit: iStock/cokada
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