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What Is an Authorized User on a Credit Card?
Key takeaways
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An authorized user can make purchases with their own card, but the primary cardholder typically controls the account and is responsible for paying the bill
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Being added as an authorized user may help build credit history if the card issuer reports activity to the credit bureaus
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Clear expectations can improve the experience, including agreeing on spending limits, how costs will be repaid, and how activity will be monitored
An authorized user is someone who's been added to a credit card account by the primary cardholder. Authorized users receive cards of their own to make purchases, but are not legally responsible for paying the bills or managing the accounts.
This feature can provide value to both the authorized user and the primary account holder. An authorized user with no credit history could, under the right conditions, use the card to build credit. An authorized user also could access card benefits like protections, rewards, and other perks.
The primary account holder can use this type of card to help a friend or family member establish credit while simplifying household finances.
To maximize the benefits, both parties need to understand the terms of the account and use their cards responsibly.
How does being an authorized user work?
Banks make these accounts simple and convenient to use. The basic aspects typically are:
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The primary cardholder controls the account and is responsible for managing it
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The authorized user can make purchases on a card issued under their own name
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The primary cardholder is responsible for payments, including for purchases by authorized users. Primary users may reach an agreement with authorized users on how they contribute to monthly payments
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Some card issuers enable primary cardholders to set spending limits for authorized users
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Account activity may appear on the authorized user’s credit report. Not all credit card issuers will report an authorized user's activity to all three credit bureaus. It's important to find out before obtaining the card whether the card issuer will report this activity. Otherwise, the card won't be as useful to an authorized user trying to build credit
By adding a spouse, a partner or child as an authorized user, a primary card holder can use this type of account to avoid the complexities of opening joint accounts.
What are the benefits of becoming an authorized user?
An authorized user could enjoy several benefits from this type of shared credit card access.
1. Helps build credit history
This arrangement can help someone with no credit history, a very limited one, or a poor record to build credit.
However, reaching this goal depends on the primary user making payments on time every month. Also, the credit card issuer must report the monthly activity to the three major credit bureaus.
Over time, the monthly activity can show lenders that a person has a good track record of using credit.
2. Access to an established credit line
Once added, authorized users have access to a credit line, which they might not have achieved otherwise. And if they could get a credit card on their own, it might have a higher interest rate and/or a lower credit limit.
Some banks establish a shared credit card limit and some enable the primary card holder to set a credit limit for the authorized user. If not, the cardholders can agree on an informal credit limit for the authorized user.
3. Potential rewards and benefits
Some credit card perks, like fraud protection, cell phone protection, and travel benefits, may apply to the authorized user's eligible purchases.
What are the benefits for the primary cardholder?
The primary cardholder could also enjoy several benefits of adding an authorized user, including:
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A boost in rewards. Increased use of the account could boost the primary account holder's credit card rewards, such as cash back and travel rewards
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Helping someone build credit history. Adding an authorized user may help a friend or loved one build credit history
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Teaching responsible use. The card, used with clear expectations and oversight, offers a way to help someone learn responsible credit card habits
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Simpler tracking. It may simplify household finances by consolidating expenses under one account
What risks are there to adding an authorized user to my credit card?
When deciding whether to add an authorized user to your account, think about the responsibilities involved and the need for communication.
There are potential risks for both sides, so it generally helps to establish ground rules. These might include what the monthly spending limit is, what the authorized user is expected to pay each month, and how often both parties will review purchases together.
Risks to the primary cardholder may include:
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Responsibility for payments. The primary cardholder typically is responsible for payments, even if the authorized user spends beyond an agreed-upon limit
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Credit score impact. The primary cardholder's credit score could be damaged. For example, spending could push balances close to the credit limit, which would impact the credit utilization part of a credit score
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Limited controls. Some issuers may not let you control the credit limit for authorized users or other aspects of the account
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Relationship stress. Trust could be damaged in an important relationship
How does being an authorized user affect credit scores?
Being an authorized user can help your credit scores in a few ways—if the credit card issuer reports the activity to the major credit bureaus.
When the primary cardholder has good credit and the cards are used responsibly, the authorized user's credit score can get a boost in three ways:
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Payment history. They inherit the primary cardholder's positive payment behaviors. Every time the primary owner pays the bill on time, credit bureaus record a positive entry on the authorized user’s file
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Low credit utilization. Scoring models typically favor good credit utilization, which is the amount of available debt you use. By joining an account with a high credit limit and a low balance, the authorized user effectively imports that healthy ratio
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Long account history. Having a longer credit history tends to improve your score. An authorized user gets the age of the credit card account added to their own credit history
On the other hand, the arrangement could damage the credit scores of both parties. Here are three ways this could occur:
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Late payments. If the primary card holder doesn't make payments on time, even if it's no fault of the authorized user, it could impact both of their scores
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High balances. Both parties may need to coordinate their spending to avoid getting too close to the credit limit. High balances can negatively impact the credit utilization part of a credit score. It typically doesn't matter which cardholder did the spending
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Account delinquency. If the account goes into default or is sent to collections, the credit scores of both parties could be damaged. However, authorized users might be able to dispute these negative marks with credit bureaus to have them removed. Also, they are not legally liable for the debt
Who should become an authorized user?
This credit card feature is designed for certain people in particular financial situations. Typically, most authorized users are:
- Teenagers or young adults learning financial responsibility
- Partners or spouses sharing finances.
- Family members (students, travelers, etc.) needing access to credit
- Individuals who don't qualify for a card independently
FAQs
Being an authorized user can help you build credit and improve your credit score in a few ways. It can help establish or improve factors that ten to be important to your credit score, such as your payment history, credit utilization, and the age of your credit.
For that benefit to occur, however, you'll need the credit card issuer to report the card activity to the major credit bureaus. You also will need to work with the primary cardholder to use the account responsibly.
Making payments on time and deciding on the amount of each monthly payment are the responsibilities of the primary cardholder. They are fully responsible for all charges, including any made by authorized users.
The primary cardholder can remove an authorized user at any time. Depending on the credit card issuer, this may be done online, through a banking app, by calling a support line, or at a bank branch.
Credit card issuers may also allow authorized users to contact them directly to have themselves removed from an account.
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