Everything you need to know about authorized users

The decision to add an authorized user to your credit card account should not be taken lightly. When you authorize a person to charge your account, you are responsible for paying for their purchases using the card linked to your account.

There are many benefits to becoming an authorized user, including building a credit history and increasing your rewards. And for every dollar your authorized user spends, you can earn points, cashback or miles.

But despite the benefits, there are some serious implications to consider when adding an authorized user. Read everything you need to know to make informed decisions about adding authorized users to your credit card account.

What is an authorized user?

An authorized user is a person who has been given official permission by the cardholder to use their credit card and who has been added to an account.

“For example, a spouse could be an authorized user of your card, as well as some other close family member, such as a teenager or college-age child,” said Monica Eaton-Cardone, chief operating officer and co-founder of Chargebacks911.

Once added to an account, authorized users will receive their own card with their name on it. All purchases made with your card or an authorized user’s card are then deducted, paid for and earn rewards on the same account. The primary cardholder is liable for debts on all cards issued to that account. Learn more about the minimum age for an authorized user.

Considerations for Adding or Becoming an Authorized User

So, what’s the benefit of adding an authorized user to one of your credit card accounts, or becoming an authorized user of someone else’s account?

The most common reason for adding an authorized user to your account is to enable that designated person to use a credit card to make purchases associated with your account.

“Your spouse, for example, may need to use your card from time to time, so adding him as an authorized user allows that,” Eaton-Cardone said.

It can also help your authorized user’s credit history by adding positive data to their credit report.

For people who want to build a credit history and in turn improve their credit score, opening a credit card account is a good step towards achieving these goals. Becoming an authorized user is an easier way to do this than opening your own accounts because you won’t need to qualify based on your own credit history. Anyone can be added as an authorized user.

After you register for an account, the payment history submitted by the primary cardholder will be shared with the three credit bureaus.

How to add an authorized user

To add an authorized user, contact the bank that issued your card, either through the customer service phone number or through the online platform. Keep important information about an authorized user handy, including their legal name, date of birth, and social security number. Overall, according to Eaton-Cardone, it’s a relatively quick and easy process.

Please note that adding an authorized user to your account may incur fees.

How to remove an authorized user

The process of removing an authorized user is much the same as adding one. You can contact your issuer and request that this person be removed from your account.

“Be aware, however, that while deleting a user will not affect your credit, it will negatively impact the credit of the person you remove from the account,” warns Eaton-Cardone. “This person won’t have your credit to calculate as part of their credit utilization ratio, which is about 30% of their credit score.”

Understanding Risks

While there are several good reasons to add an authorized user to your account, there are some potential downsides that you should be aware of in advance.

Their debts will become your debts

When you add an authorized user, you authorize that person to use your credit. If they are irresponsible, it could negatively impact your creditworthiness and cost you money down the road, Eaton-Cardone said.

“You can end up with a higher leverage ratio as well as a larger bill that you end up being responsible for,” she explained.

It is important to discuss this clearly with the authorized user before handing over the card.

“The main thing here is responsibility. Before you add an authorized user to your account, you should establish ground rules for when you expect that person to use the card and how much they can charge,” Eaton-Cardone said.

Otherwise, you could build up revolving debt that will cost you interest and also use up more of your available credit, she said.

Relationships can be strained

Another negative aspect of adding an authorized user is how it can affect your relationship with your family member.

“Sometimes primary cardholders expect an authorized user to pay for charges they have made on an account,” said Carra Kingston, a bankruptcy attorney with offices in New Jersey and New York.

While the cardholder and authorized user may have entered into a redemption agreement, this does not change the primary account holder’s liability.

“If an authorized user does not pay the charges they have incurred, the primary account holder will still have to make payments,” Kingston said. “If an authorized user does not pay the fees they charge to the card, this can cause tension in the relationship.”

Cash advances and checks may be requested

Kingston said most cards place no limits on how much an authorized user can spend or claim in an account.

“Authorized users can dispense cash just like the primary cardholder, and an authorized user can call and request checks in the name of the primary account holder,” she warned. “Authorized user is allowed to take any cash withdrawal limit of the main holder.”

Allowing authorized users to withdraw cash from a credit card can be dangerous.

“Cash payments tend to have higher interest rates and usually don’t include a grace period for paying interest on purchases,” Kingston said. “The credit rating of the primary cardholder can be seriously affected if an authorized user takes cash advances and does not return them.”

Benefits of adding an authorized user

There are many benefits that may encourage you to add an authorized user to your account. From helping your child build a credit history to earning more rewards, adding an authorized user can provide many benefits.

Build credit history

A common goal is to add a child or family member to your account to help increase their credit. “Even if your kids never use your card, simply having them as authorized users on an account establishes a credit history,” Eaton-Cardone said. This allows them to start building up credit from an early age – as long as your account remains in good standing.

Track expenses

Another benefit is that this scheme gives you the ability to track your authorized users’ spending habits. Using your online account or issuer app, you can see what your authorized user is buying (for example, useful if you want to track your teen’s spending).

Maximize your reward

Getting rewarded for spending your authorized users is an important reason why you can add them to your account. “This is most useful with travel cards, especially luxury cards with generous perks and benefits,” said Stephen Dashiell, credit card expert at Finder.com.

With each purchase, your authorized user receives rewards – points, cashback or miles – to your credit card account.

Enjoy the benefits

In many cases, according to Dashiell, an authorized user can “double” the benefits and benefits of the card. “This means that an authorized user can also receive separate access to eligible airport lounges, discounts for using the card, or, in some cases, their own separate statements for certain privileges,” Dashiell added. “What an authorized user has access to may vary by card and issuer, so you’ll need to read the card’s terms and conditions for full details.”

Alternatives to Adding Authorized Users

If the risk versus reward scenario of adding an authorized user to your credit card account is too much to worry about, there are alternatives.

Credit credit cards

One alternative to adding your child to your account is to let them open a credit card designed specifically for new cardholders instead. Eaton-Cardone offers the Deserve® EDU Mastercard for students. “This is a great option for young people who are going to college. This does not require a credit history, but it allows young people to become familiar with how to use and manage a credit card account,” she explains.

Protected Credit Cards

A secured credit card is also a practical option for those who want to build a credit history and manage expenses. The main difference between a secure card and an unsecured card is that you need to pay a deposit before you can open your account. This security deposit acts as your credit limit as well as the provider’s collateral, Dashiell said.

Joint account holder

Dashiell said that using the card as a shared account holder works much the same as an authorized account user. The main difference is that both parties are financially responsible for the account. Used responsibly, this alliance can keep budgets within limits and can cut unreasonable spending.

However, on the other hand, if someone misses a payment or runs out of card, it will reflect badly on both users’ accounts, he warned.

bottom line

If you choose to add an authorized user to your credit card account, there are many responsibilities you will have to understand. First, you – and only you – are responsible for the purchases they charge your credit card, even if they promise to pay for them.

But as an authorized user, you can improve your child’s or family member’s credit score and teach them how to use credit cards responsibly. In addition, you can earn points, cashback and miles for your purchases.