Pros and cons of being an authorized user on a credit card
It can be a solution for low or no credit — but with limitations
Being an authorized user on another person's credit card can be advantageous when you can't qualify for credit on your own. Not only do you get a credit card with your name on it that you can use to make purchases, but you can access valuable credit card perks that wouldn't be available to you otherwise. Perhaps most importantly, an authorized user card can build your credit history, so you can qualify for your own card one day.
If you have the chance to become an authorized user on another person's credit card and you trust that person completely, this situation can work in your favor. That said, you should have your eyes wide open and a full understanding of what could go wrong.
- An authorized user is a secondary person added to a credit card account that is not legally responsible for repayment.
- Becoming an authorized user can help someone build credit when they cannot qualify for a line of credit or loan because of a low score or limited credit history.
- Even as an authorized user, it's important to use credit responsibly and have a plan to pay back all amounts you charge.
What is an authorized user?
When someone applies for a credit card, they get an account in their name and a physical card to use. They also have the option to add another person to their account as an authorized user.
While authorized users also get a physical credit card with their name on it, only the primary account holder is legally responsible for repayment. Because of this, anyone who becomes an authorized user should make sure they understand how and when their purchases need to be paid back.
Lisa Fischer, the chief lending officer at the fintech company Mission Lane, says it's crucial for authorized users to demonstrate responsible credit habits if they want to avoid conflict. For the most part, this means tracking spending and only charging purchases they can afford.
"If you run up a bill that can’t be paid off by you or the cardholder, for example, this will negatively impact both of your credit," she said. "This could cause financial strain as well as strain on your personal relationship with the cardholder."
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Who can be an authorized user on a credit card?
Primary cardholders can add nearly anyone to their credit card as an authorized user, provided the person meets the card issuer's age requirements. For example, Capital One requires authorized users to be at least 18 years old, whereas Chase allows minors to be authorized users but does not report their credit history to the three credit bureaus.
Due to the risks, most authorized users wind up being family members or trusted family friends. It's not uncommon for a parent to add their teenager as an authorized user for convenience, or to add their young adult child to help them build a credit history for the future.
How does adding an authorized user work
Generally, adding an authorized user is a simple process. The primary account holder can typically add an authorized user when they apply for a card, but they can also add additional users online or over the phone after the fact.
The process for adding an authorized user is different for each credit card issuer, but cardholders typically only need to contact their card issuer and give them the authorized user's name and Social Security number (SSN).
While adding an authorized user to a credit card can be free, this may not be the case with premium rewards credit cards. For example, the Chase Sapphire Reserve requires an annual fee of $75 for each authorized user added to an account.
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Pros of being an authorized user
Becoming an authorized user can be a reasonable backup plan when you can't get approved for a credit card of your own. However, Austin Capital Bank CEO Erik Beguin says that the benefits are mostly temporary.
Here's a rundown of the ways becoming an authorized user could benefit you:
- Build credit: Beguin points out that being an authorized user means you can build credit, and there is often a temporary increase to your credit score.
- Earn rewards faster: A secondary card user also earns rewards on their purchases, so couples can reach their rewards goals faster by adding each other as authorized users. When two people combine their spending, reaching the minimum spending threshold to earn a sign-up bonus becomes much easier.
- Get access to premium perks: Authorized users can often use the benefits available to primary account holders. Depending on the card, perks can include purchase protections, airport lounge access and more.
- No legal responsibility for repayment: Being an authorized user gives you the opportunity to charge purchases and enjoy some perks without any of the responsibility. That said, those given this privilege should take it seriously and pay back all purchases they make in a timely manner.
Cons of being an authorized user
While becoming an authorized user on a credit card has its perks, there are some potential downsides. Consider the following risks before you move forward:
- Your ability to build credit may be limited: Beguin points out that many creditors don't report credit activity to authorized users’ credit reports, and that some only report this activity for those who are at least 18 years old. Before you become an authorized user for the purpose of credit-building, you should find out the card issuer's policy.
- You could hurt your credit: While becoming an authorized user can help improve credit, Fischer points out that the opposite could also happen. If the primary cardholder maxes out their credit limit or makes late payments, your credit health could be negatively impacted.
- You may not get access to rewards: While purchases by an authorized user earn rewards just like purchases by the primary cardholder do, the individual who is in charge of the account decides how those rewards are used. This means you may earn cash back or travel rewards that only benefit the primary account holder in the end.
- The primary cardholder has all the power: The person who added you as an authorized user can end this relationship at any time — and without your permission. That's why Beguin says your long-term credit goal should be building your own credit instead of "piggybacking" off someone else.
Is an authorized user the same as a joint account?
Authorized users are different from joint account holders in that they are not legally responsible for repayment. Joint account holders are legally responsible for paying back debt regardless of which account holder makes a charge.
Is an authorized user the same as a co-signer?
No, an authorized user is different from a co-signer because they are not legally responsible for repayment. Authorized users differ from co-signers in that they do not use their own credit history or score to qualify for an account.
Do you need good credit to be an authorized user?
You don't need good credit or even any credit at all to become an authorized user on another person's credit card account.
Can a credit card issuer deny an authorized user?
It's possible a credit card issuer could deny an authorized user for a number of reasons, including not meeting a minimum age requirement or having a negative credit history.
Can an authorized user make payments?
Authorized users can make payments toward a card by paying the primary cardholder for purchases they make. The primary cardholder will then add those payments to the bill.
If an authorized user has access to an online account management page for their card, they may also be able to make payments online.
Becoming an authorized user definitely has its risks, but there are benefits if your end goal is building credit for yourself. After being an authorized user for a while, you may even be able to qualify for your own credit card or loan, even if you have to start with a secured credit card.
Before you dive in, however, Fischer says you'll want to carefully consider the situation and what it means for your finances and the person you're asking for help.
"As with any relationship in which finances are involved, you should make sure you trust who you open a card with and have confidence in their ability to pay their share," she said.
- Article sources
- ConsumerAffairs writers primarily rely on government data, industry experts and original research from other reputable publications to inform their work. To learn more about the content on our site, visit our FAQ page. Specific sources for this article include:
- Equifax, "What Is an Authorized User on a Credit Card?" Accessed March 21, 2023.
- Chase, "Ways to establish credit history for your child." Accessed March 21, 2023.
- Experian, "The Pros and Cons of a Joint Credit Card." Accessed March 21, 2023.
- Capital One, "What is an authorized user on a credit card?" Accessed March 21, 2023.
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