A Complete Guide to Authorized Users on Credit Cards
Lyle is a writer specializing in credit cards, travel rewards programs, and banking. His work has also appeared on MSN Money, USA Today, and Yahoo! Finance.
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A credit card is traditionally a one-person phenomenon. The name of the person who applied will be on the card, and they're the only one authorized to use it. The accountholder can, however, make other people authorized users on the account.
Although this has benefits for both parties, it can be risky. In this authorized user guide, we'll answer what an authorized user is, how to add one, and other common questions about this credit card feature.
What is an authorized user?
An authorized user is someone an accountholder adds to a credit card account. The card issuer will mail a credit card in the authorized user's name, and that person can use the card to make purchases. The new credit card is tied to the original credit card account, and the accountholder is responsible for the bill.
Authorized users can make purchases, and a few card issuers let authorized users redeem rewards. But an authorized user can't cancel the credit card, change the billing address, or take any other action on the account.
Authorized user vs. cosigner
Consumers often get cosigners and authorized users confused, but these are two different things. When someone can't get a credit card because their credit score or income isn't high enough, a cosigner with better credit or higher income can apply with them to help them get the card. The cosigner also agrees to pay credit card bills if the primary accountholder can't or won't. Not every card issuer allows cosigners on applications.
Does being an authorized user affect my credit?
It can affect your credit to be an authorized user on someone else's credit card, but this depends on the card issuer. Most card issuers report the card's activity on the credit files of authorized users. There are, however, some issuers that don't do this with their credit cards. To find out, the accountholder can call the card issuer and ask.
If the card issuer reports the card's activity to your credit file, this can help or hurt your credit score. Your credit score should improve if the accountholder makes on-time payments and maintains a low credit utilization ratio.
On the other hand, missed payments or high credit utilization can lower your credit score even if you're not the primary accountholder. This depends on the credit scoring system. There are multiple systems, and they all have different calculation methods. The FICO system allows negative credit card activity to affect the credit score of any authorized user on the card. Under the VantageScore system, negative data doesn't always affect an authorized user's credit.
Does adding an authorized user affect my credit?
Your credit score won't change just because you added an authorized user, but the user's activity on your account can affect your credit. The most likely way this would happen is if your authorized user overspends and uses a large portion of your available credit. This will raise your credit utilization ratio, which can decrease your credit score.
If your authorized user charges an amount that you can't easily pay off, then it could eventually lead to payment issues. Even a single missed payment will do a number on your payment history and likely cause significant damage to your credit.
What are the benefits of an authorized user?
There are several benefits for the authorized user and the accountholder on a credit card:
- The authorized user can make purchases using the credit card account. If you want your spouse, child, parent, or anyone else to be able to make purchases using your card, the best option is to add them as an authorized user. Merchants often won't accept credit cards if the name on the card doesn't match that of the person using it.
- It can improve the authorized user's credit score. Being an authorized user is a good way for someone to improve credit scores, especially someone who is rebuilding credit and can't get approved for many cards on their own.
- The accountholder can earn more rewards. With rewards credit cards, the account will also earn points or cash back on purchases made with the authorized user's card. Some cards even have extra bonus offers just for adding an authorized user.
- The authorized user could share in the card's benefits. Depending on the credit card, there may be perks that both the accountholder and the authorized user can take advantage of. For example, a high-end travel card with airport lounge access may also include that benefit for authorized users, even when the primary accountholder isn't present.
What are the risks of adding an authorized user to my credit card?
There's one risk of adding an authorized user to your credit card, but it's a big one -- you're responsible for any charges your authorized user makes.
In a worst-case scenario, your authorized user could max out your credit card. That would raise your credit utilization, potentially lowering your credit score. You'd also have a large credit card bill to pay.
To protect yourself, you should only add people you trust completely as authorized users. It's also wise to set some ground rules on how much they can spend, or ask that they talk with you before making any big purchases.
How do I add an authorized user to my credit card?
The exact process for adding an authorized user depends on the credit card, but most will let you do so either online or over the phone. Online, look for the "add an authorized user" option and enter the required information. Alternatively, you can call the number on the back of your credit card and set it up with a customer service representative.
Your card issuer may ask for any of the following about the authorized user:
- Full name
- Date of birth
- Social Security number
What are the best credit cards for adding an authorized user?
No-annual-fee credit cards are some of the best options for adding an authorized user, because you won't need to pay anything for the extra card. They're an especially good choice if your authorized user just needs a credit card without any additional perks. For example, you'd probably want to go with a no-annual-fee card in these situations:
- You're adding your child as an authorized user for building credit and having a credit card for emergencies.
- You're helping someone rebuild credit.
Travel rewards cards are another popular option, because authorized users usually get some or all of the same travel perks as the primary cardholder. If a travel card offers airport lounge access or a Global Entry membership credit, you may be able to share those perks with another person by adding them as an authorized user. Keep in mind that travel cards with annual fees often charge an additional authorized user fee.
If you want control over how much your authorized user spends, then look at American Express cards. Unlike most other card issuers, American Express lets accountholders set spending limits on authorized user cards.
Deciding to add an authorized user
There are situations when it makes sense to add an authorized user to your credit card. It could work out well if you and your partner want to combine your finances. It's also a great way to help your children build credit at an early age.
It's not a decision to take lightly, though. Unless you pick a credit card that allows a spending limit for authorized users, anyone you add will have full access to your credit line.
The safest rule is to only add an authorized user if you trust them completely with your credit card. After all, you'll ultimately be responsible for the bill.