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If you’re a soon-to-be homeowner, your lender might mention that you’re required to purchase hazard insurance. You may wonder, Is hazard insurance the same as homeowners insurance? In fact, hazard insurance is a part of your standard homeowner’s insurance policy.

Let’s look at the ins and outs of hazard insurance, including what it covers and what it doesn’t, and how much you can expect to pay for it.

Is Hazard Insurance the Same as Homeowners Insurance?

A common misconception is that hazard insurance is the same as homeowners insurance when, in fact, the former is a part of the latter. That’s because people sometimes refer to homeowners insurance as hazard insurance. You can think of it as a piece of fruit in a fruit and cheese basket — not the entire kit and caboodle.

Hazard insurance typically refers to the protection of the structure of your home and additional structures on the property (like a shed, deck or detached garage), whereas homeowners insurance as a whole also includes coverage for liability, additional living expenses, and personal belongings.

Recommended: What Does Flood Insurance Cover?

What Is Hazard Insurance?

Hazard insurance is part of homeowners insurance, and it typically covers the structure or dwelling, but not liability, personal belongings, or additional living expenses. Because it’s a part of a standard homeowners insurance policy, it cannot be purchased as a standalone policy. Rather, it’s folded into your homeowners insurance.

Hazard is often confused with catastrophic insurance, which is a standalone policy that covers against perils that aren’t included in a standard homeowners insurance policy, such as floods, earthquakes, and terrorist attacks.

Recommended: What Does Flood Insurance Cover?

What Does Hazard Insurance Cover?

Should there be damage to the actual structure of your home, the hazard insurance portion of your homeowners insurance policy will offer a payout. This usually includes damage to or destruction of the actual building of your home from natural events, such as extreme weather or a natural disaster.

However, the specifics of hazard insurance coverage will depend on whether it’s a “named perils” or an “open perils” policy. Read on for more details on what those entail.

Named Perils

Named perils essentially means events, incidences, or risks that are “named” or “listed” under your plan as covered. In other words, if it’s not listed, then it’s not covered.

A named perils policy typically protects against 16 specific types of perils, including:

•   Windstorms or hail

•   Fire or lightning

•   Explosions

•   Riots or civil disruption

•   Smoke

•   Theft

•   Falling objects

•   Vandalism or malicious mischief

•   Damage caused by vehicles

•   Damage caused by aircraft

•   Damage from ice, snow or sleet

•   Volcanic eruption

•   Accidental discharge or overflow of water or steam from HVAC, a plumbing issue, a household appliance or a sprinkler system

•   Accidental cracking, tearing apart, burning or bulging of HVAC or a fire-protective system

•   Freezing of HVAC or a household appliance

•   Accidental damage from electrical current that is artificially generated

A homeowners insurance policy that is a named perils insurance policy is usually less expensive than an open perils policy.

Open Perils

While a named perils policy will only cover what’s listed in your policy, an open perils policy will provide coverage unless something is specifically excluded and noted as such in your policy.

Typical exclusions under an open perils policy include:

•   War

•   Nuclear hazard

•   Water damage from a sewer backup

•   Damage from pets

•   Power failure

•   Mold or fungus

•   Damage due to an infestation of animals or insects

•   Negligence and general wear and tear

•   Smog, rust or corrosion

An open perils policy tends to be for newer homes or homes in low-risk areas. Additionally, because an open perils homeowners insurance policy tends to be more comprehensive, they typically cost more compared to a named perils policy.

Recommended: How Much Is Homeowners Insurance?

What Isn’t Covered by Hazard Insurance?

Now that we’ve looked at what hazard insurance may cover, here’s what typically isn’t covered.

Flood Coverage

Flood coverage isn’t part of a standard homeowners insurance policy, so you’ll need to take out a separate policy if you want it. In fact, if you live in an area that’s a designated high-risk flood zone, you may be required to take out flood insurance.

The cost of the policy generally hinges on how much of a risk your home is, which factors in your location, and the age of your home.

Earthquake Coverage

Earthquake coverage is another item that hazard insurance doesn’t offer, so if you live in an area that’s subject to earthquakes, you may want to get an earthquake insurance policy. This can either be tacked on to an existing policy as a rider or purchased separately.

When you purchase earthquake coverage, your home is usually protected against cracking and shaking that can damage or destroy buildings and personal possessions. But if there’s water or fire damage because of an earthquake, then that generally would be taken care of by a standard homeowners insurance policy.

How Much Does Hazard Insurance Cost?

As hazard insurance is part of a standard homeowners insurance policy, you won’t need to pay anything extra. According to the most recent data from the Insurance Information Institute (III), the average cost of a homeowners policy in the U.S. is $1,411.

Keep in mind that the cost can vary depending on a host of factors: the location of the home, the cost to rebuild, the size and structure of your home, your age, your credit score, your deductible, and the type of policy and amount of coverage you desire.

Do You Need Hazard Insurance?

In short, yes. As you will need to get homeowners insurance if you are taking out a mortgage on your home, and hazard insurance is folded into homeowners insurance, then you’ll need hazard insurance.

When shopping around for hazard insurance, think about what is required by your mortgage lender, and what coverage amount would be suitable for your home and situation. Play around with different deductibles and coverage amounts to see how they would impact your premium, and don’t forget that discounts can also lower the cost of your insurance.

The Takeaway

Hazard insurance and homeowners insurance aren’t the same thing. Rather, hazard insurance refers specifically to coverage for the structure of your home and is an element of homeowners insurance. What your hazard insurance policy will cover depends on whether you have a named or open perils policy, though it generally won’t extend to damage from earthquakes or floods.

If you’re taking out a mortgage on your home, you’re generally required to get homeowners insurance — and, by extension, hazard insurance.

If you’re a new homebuyer, SoFi Protect can help you look into your insurance options. SoFi and Lemonade offer homeowners insurance that requires no brokers and no paperwork. Secure the coverage that works best for you and your home.

Photo credit: iStock/MicroStockHub

Auto Insurance: Must have a valid driver’s license. Not available in all states.
Home and Renters Insurance: Insurance not available in all states.
Experian is a registered trademark of Experian.
SoFi Insurance Agency, LLC. (“”SoFi””) is compensated by Experian for each customer who purchases a policy through the SoFi-Experian partnership.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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If you are thinking about closing a credit card you don’t use, know that while it may eliminate a fraud risk, doing so can negatively impact your credit. It can shorten your credit history and lower your credit limit, which in turn could increase your credit utilization ratio. Both of these factors can lower your score.

So before you cancel an unused credit card, make sure you understand how that can alter your credit score. That will allow you to make an informed decision that is best for your specific financial situation.

How Do Unused Credit Cards Affect Your Credit Score?

There are a few factors that make up your credit score. Two of the components of your credit score are your utilization ratio (how much of your available credit you’re using) and your average age of accounts. Closing an unused credit card can impact both of these.

Credit Utilization

Your credit card utilization is defined as the amount of your available credit that you are currently using. So if you have a card with a $10,000 limit and you have an average balance of $1,000, your utilization is 10% ($1,000 divided by $10,000). A low utilization is a positive indicator for your credit score. So closing any credit card account will lower the total amount of available credit you have. This will raise your utilization percentage and possibly lower your credit score.

Recommended: How to Read a Credit Report

Credit History Length

Another factor that makes up your credit score is the average age of your accounts. Having credit accounts that have been open for a long time is generally considered more positive for your credit score than having only recent accounts. So if you close an unused credit card, especially one that you’ve had open for a long time, it can lower your average age of accounts and possibly also hurt your credit score. The account may stay on your report for a while, but when it eventually drops off, your score could decrease.

Recommended: 10 Advantages of Credit Cards

Are There Risks to Keeping Unused Credit Cards?

So while it can make sense to keep your unused credit cards open, there are a few risks of keeping unused credit cards. If you no longer are monitoring your account, there is a higher risk that someone might commit credit card fraud with your account. So you’ll want to make sure that you are regularly looking at your accounts, and maybe even make an occasional purchase on each credit card that you have.

When Is It Better to Cancel a Credit Card?

There are also some situations where it’s better to just cancel a credit card. One reason to cancel a credit card is if it comes with an annual fee.

•   If you’re not using a credit card and not getting any value from its benefits, it usually won’t make sense to pay the annual fee, especially when there are so many credit cards that offer good rewards with no annual fee.

•   Another situation where it might make sense to cancel a credit card is if you’re having trouble controlling your spending. If having a credit card is causing you to go into debt or spend more than you earn, it might make sense to do a bit of a financial reset.

Using a debit card or moving to paying with cash might help you get to a better spot, financially speaking.

Recommended: 10 Advantages of Credit Cards

Can You Cancel a Credit Card Without Hurting Your Credit Score?

If you’re thinking about canceling a credit card without impacting your credit score, there are a few things that you can do to help mitigate the hit to your credit score.

•   One thing is to make sure to pay down any balance on the card before you close it.

•   Another possible option is to call your credit card company and see if you can move some of your available credit to another credit card. That might help keep your credit utilization ratio high.

The Takeaway

If you have a credit card that you no longer use, you might be tempted to just cancel the card so you don’t have to think about it anymore. However, there may be some reasons where it can make more sense to keep the card open, even if you never or rarely use it. Keeping it open may help build your credit score, and, if you close a card you’ve had for a long time, it can impact your credit score.

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

Do unused credit cards close automatically?

An unused credit card generally won’t be closed automatically, at least at first. However, most credit card companies do reserve the right to close your account for any reason, including if you don’t use your credit card. So if you want to keep a credit card account open, it may make sense to occasionally make a purchase or two.

Does canceling an unused credit card hurt your credit?

Canceling an unused credit card can lower the total amount of your available credit. This may raise your credit utilization ratio, which is one of the major factors that make up your credit score, and a higher number can ding your score. You may also shorten your credit history, which can negatively impact your score as well. Make sure that you understand any possible impacts to your credit score before you cancel an unused credit card.

Is it bad to have an unused credit card?

No, in most cases it is not bad to have an unused credit card. In some cases, it can even help to keep your credit card accounts open, even if you’re not actively using the card. This is because having an open account increases your available credit and it may raise your average age of accounts. Both of these are factors that go into calculating your credit score.

Photo credit: iStock/FreshSplash

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

This content is provided for informational and educational purposes only and should not be construed as financial advice.

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

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Adding your spouse to a credit card could indirectly affect your credit, for better or for worse. If the bill is paid on time and credit utilization is lowered, it might build your score. But if your partner doesn’t use the card responsibly and it impacts your ability to pay the monthly bill, your credit may suffer as a result.

Regardless of whether or not you choose to combine your finances, both partners will still have their own separate credit scores. Credit cards in the name of one spouse will not directly affect the credit of the other spouse.

That said, take a closer look at how adding your spouse to a credit card can affect credit.

Can Adding Your Spouse as a Co-borrower Affect Your Credit Score?

Cosigning on a loan, credit card, or other debt account can impact your credit score. Applying for a new credit account, even as a cosigner, will show up on your credit report. Having a new account on your credit may have a small impact just for opening the account.

Additionally, how you and your spouse use the new account will also affect your credit score, as your balance and payment history will be reported to both of your credit reports. For instance, a new account could raise your total credit limit. That could lower your credit utilization even if you carry the same balance, which can be a positive.

If however, you use that credit you are granted and your credit utilization percentage goes up or you make late payments, then it could have a negative effect. For these reasons, adding a spouse to a credit card may not help your credit.

Can Cosigning Affect Your Credit Score?

Cosigning on a loan, credit card, or other debt account can impact your credit score. Applying for a new credit account, even as a cosigner, will show up on your credit report. Having a new account on your credit may have a small impact just for opening the account.

Additionally, how you and your spouse use the new account will also affect your credit score, as your balance and payment history will be reported to both of your credit reports. For instance, a new account could raise your total credit limit, but if you don’t carry a balance, then your credit utilization would look smaller, which can be a positive.

If however, you use that credit you are granted and your credit utilization percentage goes up or you make late payments, then it could have a negative effect. For these reasons, the answer to “If I add my spouse to my credit card, will it help their credit?” is “Maybe.”

Recommended: Joint Accounts vs. Separate Accounts in Marriage

7 Ways You Can Help Your Spouse Build Credit

If you have good credit but your spouse does not, here are a few ways that you might consider helping them build credit:

1. Authorized User

If you already have good credit but your spouse does not, one thing that you can do is add them as an authorized user on a credit card. Having them on an account that you already have in good standing can help them to build their credit. Just make sure that they use their card responsibly or it can negatively impact both of your credit scores.

2. Secured Credit Card

If you don’t want to or can’t add them as an authorized user to one of your accounts, another option might be to have them apply for a secured credit card. With a secured credit card, you put down an initial deposit that serves as your credit line. As you make payments to your account, your available credit increases.

Depending on the card, you may be able to change from a secured card to a traditional or unsecured credit card after building your credit history.

3. Joint Credit Account

Like a joint bank account, a joint credit account is one where two people are both listed as owners of the account and are jointly responsible for usage. With a joint credit account, usage, balance and payment history will show up on both borrowers’ credit reports.

However, it’s worth noting that many major credit card issuers no longer allow joint credit card accounts. If you find one that does, then this could be an option to help build credit.

Recommended: How to Build Credit Over Time

4. Apply for a Small Loan

Another option to help build credit may be to apply for a small loan together. Getting a personal loan in both of your names may help build credit. One of the things many lenders look for in a credit report is a reliable history of on-time and regular payments. Taking out a small personal loan (and then regularly making payments) can help build credit history.

5. Review Credit Reports Together

Another tip for establishing credit is to regularly review both of your credit reports together. Your credit report contains a history of the different loan, credit card and other debt accounts that you have had. Reading your credit report regularly is a great habit to have as you can make sure that there are no errors, inconsistencies or incorrect information on your report. If there is, you can take steps to correct it, either with the account directly or the credit bureau.

You are entitled to one free credit report per year from each of the big three credit-reporting agencies (Equifax®, Experian®, and TransUnion®). You can access your reports at AnnualCreditReport.com .

6. Discuss Money Management

Another great financial habit to have is to regularly discuss money management. You’ll want to work together on making sound financial decisions, setting financial goals, or deciding on big-ticket purchases. When both partners are involved in the household budgeting and finances, it makes it easier to stay on the same financial page.

7. Establish and Stick to a Budget

One of the best habits that you can have to improve your finances is to establish and stick to a budget. A budget is a tool that helps you not spend money on things that are not important to you, so that you still have money to spend on the things that are important to you.

At its simplest, a budget can just be a listing of the expected income and expenses for a month. Sticking to a budget can just mean making sure that your income exceeds your expenses. There are a variety of methods you might try out and see how they work for you, such as the envelope system and the 50/30/20 budget rule, among others.

Recommended: Breaking Down the Different Types of Credit Cards

The Takeaway

Even if you combine finances in your marriage or partnership, each individual will still have their own credit report and credit score. Adding your spouse to a credit card account will not directly impact your credit score. However, the manner in which they use the card can have an effect on your credit.

Work together to set up sound financial habits so that both of you use your credit responsibly. Having a good credit score is one of the biggest financial assets that you will have in life.

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

Will adding my spouse to my credit card build our credit?

It’s important to note that even if you combine your other finances, both you and your spouse will continue to have separate credit reports and credit scores. If you have good credit but your spouse does not, you could add them as an authorized user to one of your credit card accounts. Just make sure that they use the card responsibly, or it can have a negative impact on both of your scores.

Does my spouse affect my credit score?

Regardless of whether or not you combine finances in marriage, your credit scores remain individual accounts. Your spouse will not affect your credit score, unless you have joint accounts where both of you are listed as borrowers on the account. Another way your spouse can affect your credit score is if their spending or financial habits cause you to miss payments or increase balances on your own accounts.

Will lenders look at both spouses’ credit scores?

Whether or not lenders look at both spouses’ credit scores will depend on what type of loan you’re applying for. If you apply for an individual credit card, the lender will generally only look at your credit report. However, if you apply for a joint loan (such as a home mortgage), then lenders will look at both credit reports. If one spouse has poor credit, it may not make sense to apply in both spouses’ names.

What happens if I have a good credit score, but my spouse doesn’t?

One spouse’s credit score does not directly affect the credit score of the other spouse, unless they are joint borrowers. If you have a good credit score but your spouse does not, that may mean that you will want to apply for loans or mortgages in only your name.

Photo credit: iStock/Eva-Katalin

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

This content is provided for informational and educational purposes only and should not be construed as financial advice.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

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Every credit card issued in the U.S. — and around the world — must be 3.375 inches wide by 2.125 inches high, according to requirements established decades ago by the International Organization for Standardization (ISO).

Credit card issuers can get a little creative with their logo and some other design features, but there are rules regarding credit card size, including how high, wide, and thick they can be. (And, by the way, those same rules apply to debit cards and government-issued IDs.)

Read on to learn why this is the globally accepted size, plus more details.

Why Are All Credit Cards the Same Size?

It makes sense that all credit cards should be a uniform size so they can fit conveniently in the slots of any type of wallet. But that’s just a happy byproduct of card standardization.

The dimensions were put in place so that payment-processing technology can accept any credit card, no matter where the card came from or where it’s used. This means the same cards you use to make purchases or withdraw cash in the U.S. can go with you when you take a trip to Paris, France, or any of the ISO’s member nations.

All financial transaction cards must follow the ISO’s ID-1 format. It specifies the dimensions of a credit card in inches must be 3.375 wide by 2.125 high, with a thickness of 0.0299 inches, and the corners must be rounded. The sequence of the digits in your credit card number and other card features also must follow standards set by the ISO.

When Did the Size of a Credit Card Become Standardized?

Although credit cards have gone through several major changes over the past 60 or so years — especially when it comes to developing new ways to pay and protect against identity theft — they’ve actually looked pretty much the same since the late 1950s.

There were different versions of credit “cards” before that — made from clay tablets in ancient times, dog tag-style metal plates in the 1930s, and even paper and cardboard in the ‘40s and ‘50s. But when American Express and Bank of America began issuing cards in 1958, and other banks followed suit in the next few years after that, credit cards quickly evolved to the size and shape they are today. Even that magnetic “swipe” stripe on the back has been around for decades: It was invented in the 1960s by an IBM engineer and became the standard worldwide by the early ’70s.

Recommended: What Is a Contactless Credit Card and How Does It Work?

What Are Credit Cards Made Of?

American Express is credited with creating the first plastic credit card, and that’s still what most cards are made of. A card is typically created using a plastic resin known as polyvinyl chloride acetate (PVCA) that makes it bendable, durable, and water resistant.

But, as you likely know, there are many different kinds of credit cards today. And that variety includes cards made of varied materials.

Some credit card companies also issue metal credit cards, which are sturdier than plastic cards and usually heavier, too. (This only amounts to a few grams, however, so not nearly enough weight to put extra stress on a pants pocket or purse strap.)

What Is the Weight of a Credit Card?

While most plastic credit cards weigh about 5 grams, metal credit cards — which may be made from stainless steel, aluminum, titanium, or a mix of metals — may weigh in at anywhere from 10 to 18 grams.

These heavier cards are sometimes considered more prestigious, as many premium cards are made of metal. And feeling that distinctive heft in your hand can make a metal card stand out from plastic cards. But metal cards aren’t as rare as they used to be. And the way a credit card works is basically the same no matter what material it’s made from.

If you’re thinking about applying for a credit card, you may want to start by finding the card that’s the best fit for you based on its financial benefits rather than its appearance or physical weight. It can be helpful to compare the type of rewards a card offers, if it has low or no fees, the interest rate and credit limit you can qualify for, as well as other perks.

Recommended: What Is the Average Credit Card Limit and How Can You Increase It?

Are There Other Design Features that Can Vary?

Although all credit cards are the same size and share other important features, if you lay out your credit cards side by side in front of you, you’ll also likely spot a few differences.

Your credit card number may be on the front of some cards and on the back of others, for example, and those numbers might be flat or slightly raised (embossed). There may or may not be a space for your signature. And the security hologram and code verification value (CVV) — features that are there to protect you from fraudsters — also may vary a bit from card to card.

The magnetic stripe and credit card chip used for making payments are located in the same spot on every card, though. Again, this is designed to make processing transactions as universal and convenient as possible. Some cards are phasing out the swipe stripe on its cards, however, as chips gain traction.

Recommended: Guide to Choosing a Credit Card

The Takeaway

Credit card size is standardized globally at 3.375 inches by 2.125 inches. Although there have been significant advancements over the years in how credit cards can be used, how payments are processed, and the technology that helps shield consumers from theft, the standard credit card size and shape hasn’t changed in decades. And thanks to the international standards that dictate credit card dimensions, all your cards should fit in any card reader used worldwide — and in the slots in your wallet.

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

What size is a credit card in centimeters?

The International Organization for Standardization (ISO) specifies that credit cards, debit cards, and gift cards must be 8.56 cm by 5.398 cm (which is 85.6 mm by 53.98 mm, or 3.375 inches by 2.125 inches). The ISO standard for credit card thickness is .076 cm (that’s .76 mm, or about .03 inches).

What is the print size on a credit card?

Print size, font, and color may vary from one credit card to the next. Some credit card issuers even allow their customers to personalize a card with their own custom or semi-custom design.

How can visually impaired consumers tell a credit card from a debit card?

Credit card issuers are increasingly moving away from using raised letters and numbers as part of their card designs and developing inclusive options. Mastercard, for instance, offers the Touch Card, which uses a distinctive notch on the side (rounded for debit, squared for credit, triangular for prepaid) to aid those who may need a tactile way to identify the card they’re using.

Photo credit: iStock/Sitthiphong

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

This content is provided for informational and educational purposes only and should not be construed as financial advice.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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When it comes to credit cards, a cosigner and an authorized user play very different roles: A cosigner could be responsible for the debt but usually can’t shop with the card. An authorized user, however, is the reverse: While they can make purchases with the card, they are not liable for the debt.

It’s important to understand these differences if you’re considering either choice. That way, you can choose the option that is best for your specific financial situation.

What Is a Credit Card Cosigner?

If you are unable to be approved for a credit card on your own, you may be able to apply for a credit card with a cosigner. Similar to a cosigner on a loan (say, a mortgage or a personal loan), a cosigner guarantees they will pay any balance on the card if the primary applicant does not. However, unlike with a joint credit card, a cosigner may not receive a physical card or be able to access the account information.

Also, it is worth noting that recently many credit cards have changed policies and no longer allow you to apply with a cosigner. In other words, it may be hard to find a card that will let you pursue this path.

Pros and Cons of a Cosigner

Here are the pros of a cosigner:

•   A cosigner can be a good option if you’re unable to be approved for a card on your own. Having a cosigner with good credit may allow you to be approved and start to build credit under your own name with the big three credit bureaus.

However, as noted above, there’s a big con to this arrangement:

•   Most major banks do not allow credit card cosigners. Instead, it may be a better option to apply for a secured credit card (you’ll need to make a down payment for this) or become an authorized user.

What Is a Credit Card Authorized User?

An authorized user on a credit card is someone who has the ability to make purchases on the account, without any obligation to make payments. This might be a spouse, child, or other trusted friend or family member. You can add an authorized user to your account, but just keep in mind that you as the primary account holder will be responsible for any purchases that they make.

Pros and Cons of Authorized User

Here’s the upside of an authorized user:

•   Adding an authorized user to your account can be a good way to earn additional credit card rewards. The reason why? You as the primary account holder will earn rewards for purchases made by any authorized users on your account.

•   It may be a way to help a trusted friend or family member build their credit, as long as you both use the card responsibly.

Now, for the downside:

•   The biggest con to adding an authorized user to your credit card account is that you are legally responsible for any charges that they make. So if they spend way more than you were expecting, it could put you in an awkward personal and financial situation and possibly damage the relationship.

•   There is also usually a minimum age to be an authorized user, which is something else to keep in mind. If you’re trying to add a child or teen, you may have issues, depending on the card issuer’s policies.

Recommended: How to Get a Credit Card for the First Time

What Is the Difference Between a Cosigner and an Authorized User of a Credit Card?

Here’s a quick look at some of the differences between a credit card cosigner and a credit card authorized user.

Do Cosigners and Authorized Users Have Anything in Common?

There are some important differences between being an authorized user and getting a cosigner to apply for a credit card, as mentioned above. However, there is one major thing they have in common. Both of these are strategies for people whose credit may not allow them to be approved for a credit card on their own.

In terms of the different kinds of credit cards that might be of interest, a joint credit card or a secured credit card are two other similar strategies.

Is a Cosigner or Authorized User Right for You?

Because very few major banks allow credit card cosigners, it’s likely that is not going to be an option for most people. Instead, becoming an authorized user may be a better strategy if you’re looking to positively impact your credit. If you become an authorized user on the account of someone who already has good credit and continues to use the card responsibly, it may help build your credit.

Recommended: Guide to Choosing a Credit Card

The Takeaway

Becoming an authorized user on someone else’s credit card account and getting a credit card cosigner are both strategies intended to help improve your credit. Because very few major banks currently allow credit card cosigners, becoming an authorized user may be a better strategy. When you become an authorized user on the account of someone who is using their card responsibly, it may help build and improve your credit score as well.

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

Does adding someone as an authorized user build their credit score?

It is possible that adding someone as an authorized user can help build their credit score. Even though authorized users are not legally responsible for the purchases or debt on the account, the account is reported to the major credit bureaus and will appear on their credit report. So as long as the account is used responsibly, it can positively impact both people’s credit score.

Is it better to be an authorized user on someone’s card or to have your own credit card?

If you’re just starting out or having trouble qualifying for a credit card in your own name, it can make sense to become an authorized user on someone else’s credit card account. When used responsibly, it can help improve your credit and possibly put you in a position where you can be approved for your own card. Once that happens, you may prefer to have your own credit card.

Do cosigned credit cards build credit?

When you apply for a credit card with a cosigner, you are responsible for making payments to the account as the primary cardholder. This means that generally your payment history and account balances will be reported to the major credit bureaus and used in determining your credit score. If you use your card responsibly, it can help build your credit.

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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

This content is provided for informational and educational purposes only and should not be construed as financial advice.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

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