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.
Key Points
• A cosigner guarantees debt repayment of a credit card card but differs from an authorized user, who can make purchases but is not liable for the debt.
• The legal responsibility of a cosigner includes repaying the debt if the primary borrower fails but without access to the account.
• An authorized user has the ability to make purchases on the credit card account but is not responsible for the debt.
• Being a cosigner helps someone else get approved for a card but comes with the risk of legal responsibility for the debt and limited account access.
• Becoming an authorized user can aid in building credit through the primary cardholder’s responsible use, as the account is reported to credit bureaus.
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.
| Cosigner | Authorized User |
|---|---|
| Generally does not get their own physical card | Gets their own physical card in their name |
| Often is not able to access the account | Has access to the account |
| Many credit card companies do not allow credit card cosigners | Most credit card companies allow authorized users |
| A cosigner is legally obligated to repay the debt if the primary borrower does not | An authorized user is not legally responsible to pay for any purchases |
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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