One of the easiest ways to build credit history is by using a credit card. But if you’re too young or trying to repair your credit, getting a credit card might not be an option.
That’s where becoming an authorized credit user could help.
If you're thinking about adding an authorized user to your credit card account or becoming one yourself, here are some important things you need to know.
What Is an Authorized User?
An authorized user is someone who’s been added to a credit card account but isn’t the primary account holder.
This could be a child added to a parent's account, a spouse added to their partner's account, or even a close friend added to another friend's account.
The authorized user isn't the primary cardholder, but they enjoy some of the same benefits of having a credit card as if they were one. Most notably, they can piggyback on the primary cardholder's regular payments to establish a credit history.
It's important to know that the authorized user isn't responsible for the account. They are issued a credit card of their own and can make purchases with it, but they aren’t responsible for making payments. That responsibility falls to the primary cardholder.
While not every credit card issuer will allow account holders to set up spending limits, some do.
RELATED: When Should You Get a Credit Card?
Authorized users vs. joint account holders
Authorized users are different from joint account holders. Each has different responsibilities that can affect how their credit is built.
The biggest difference is that joint account holders are responsible for payments and fees on the credit card, alongside the primary cardholder.
Married couples might prefer this for managing finances, but it can also complicate things. If a payment is missed and it’s reported to the credit bureaus, both account holders are affected, regardless of who made purchases on the card.
Joint account holders also have more control over the account than authorized users. A joint account holder can dispute charges or request a spending limit increase, while an authorized user typically can’t.
You can add or remove an authorized user at any time, whereas a joint owner typically must be added during the account opening process.
READ MORE: How Should Married Couples Split Finances?
How Being an Authorized User Affects Your Credit
Being an authorized credit user can help you establish a credit history or rebuild credit if you’re digging yourself out of debt.
Credit card issuers report your account activity to the major credit bureaus, even if you’re just an authorized user. So, if payments are made on time and the balance is paid in full each month by the primary cardholder, this could help boost the authorized user's credit score.
This can happen without the authorized user even having their own physical card.
But being an authorized user can have a negative impact if payments aren't made on time or in full. Irresponsible use by the primary cardholder could negatively impact the credit of the authorized user — so only be an authorized user for someone you trust.
Credit utilization is another big factor to consider. If the primary user goes on a spending spree, they could use up too much available credit. Credit utilization accounts for about 30% of your credit score.
Discuss expectations and set limits upfront on how to use a credit card with an authorized user.
What Is the Authorized User Responsible For?
Authorized users don’t have very many formal responsibilities. Unless the primary account holder sets up a specific spending limit, the authorized user can spend as much as the credit limit on the account.
They have no obligation to make payments or pay fees.
However, they may have responsibilities to the primary cardholder. For example, if a parent adds a child to their account, they may set expectations about what's allowed to be charged and whether the child should contribute to monthly payments.
But this is decided between the two users and is not part of the formal card agreement with your issuer. Adding an authorized user can be part of a bigger process to teach someone how to manage money and establish good spending habits.
READ MORE: How To Teach Your Child Financial Responsibility
How To Add an Authorized User to Your Credit Card
You can add an authorized user by calling your credit card company or through your online account. The system will then issue a credit card in their own name.
Before formally adding them, make sure you’ve set expectations for how they will participate in the account. Determine what portion of the balance they will pay each month and how they will pay it.
And create an exit plan right from the start to eventually transition them to an account of their own.
FAQs
How do you remove an authorized user from a credit card?
Depending on the issuer, you can remove them from your credit card either online or by contacting customer service. Calling your credit card company directly is probably the best way, since it allows you to verify the removal from your account.
Do authorized users have spending limits?
Credit cards don’t always allow you to set up specific spending limits for authorized users. Typically, authorized users have access to whatever the credit limit is on the card, just like the primary cardholder.
Nevertheless, there are methods to oversee their spending. You can set up an unofficial spending limit offline and regularly check in to monitor the account’s activities.
Some credit cards allow you to set spending alerts for specific dollar amounts or at certain vendors. Although it won't stop purchases, it can signal potential overspending.
TL;DR: Becoming an Authorized User
As an authorized user, you get your own card and benefit from the primary cardholder's payment history, which can boost your credit score — but only if they're responsible with money. If they have bad habits, those unfortunately become your credit problem too.
Before adding or becoming an authorized user, make sure it's with someone you absolutely trust and set clear spending expectations upfront.
When the arrangement works well, it's a great option for building a credit history, whether you're starting from scratch or rebuilding after financial setbacks.
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