What Is an Authorized User on a Credit Card?

What Is an Authorized User on a Credit Card?

An authorized user on a credit card is a person who is allowed to use someone’s else credit card account to make purchases. Authorized users can get their own credit card with their name on it, and they have access to the primary cardholder’s credit line, but authorized users are not responsible for making payments.

The fact that authorized users are not on the hook for bill payments is one big reason why credit card companies don’t need to check an authorized user’s credit report when they’re added to an account. Authorized users can still build credit, though.

Key Things to Know About Authorized Users on Credit Cards

• Restrictions: Some issuers have minimum age requirements for authorized users and/or a maximum number of authorized users you can add to your account.
• Privileges: Authorized users may make purchases, earn rewards, report lost or stolen cards, and access at least some benefits.
• Credit building: Most issuers report account activity to the major credit bureaus every month for authorized users.
• Purchase liability: Authorized users are not responsible for making payments. That obligation belongs to the primary cardholder.
• Removal: An authorized user can request removal from the account online or by phone. The primary accountholder can also remove authorized users.

Who Can Be an Authorized User?

You can make anyone an authorized user on a credit-card account. All you need is the person’s name, date of birth and, in some cases, their Social Security number. Most credit card issuers don’t have restrictions regarding the authorized user’s age.

But just because you can add someone as an authorized user doesn’t mean you should. As the primary account holder, it is your credit score, reputation and money on the line. It’s therefore extremely important that you fully trust someone before making him or her an authorized user.

“Ask yourself if it’s a good idea to get involved in a financial relationship with this person,” said Lisa Bolton, a marketing professor at Pennsylvania State University who focuses on consumer insights. “The more established of a relationship and the more trust between the people, the better off it’s going to be.”

That’s why some of the most common authorized user relationships include:

• Parent-Child
• Employer-Employee
• Couples

“There’s some abuse of authorized use, as well, where actually there is almost no real relationship and people are being put on cards to help people’s credit history,” Bolton said. “That’s not the purpose of it, and that shouldn’t be done because it’s becoming a big problem for credit card companies, and it’s going to put at risk this opportunity for people who are using it for legitimate purposes.”

Authorized User Policies by Major Credit Card Company

How Being an Authorized User Affects Your Credit Score

Once an authorized user is added to a credit card account, the issuer will almost always begin relaying account information to the major credit bureaus on a monthly basis under the authorized user’s name. As long as the account is managed well, the authorized user’s credit report should reflect positive information, whereas account mismanagement (e.g., missing payments or exceeding the credit limit) produces the opposite effect.

In some cases, a credit card issuer may spare authorized users from negative credit information by not reporting to the bureaus on the user’s behalf if the account is delinquent (since paying is the responsibility of the primary cardholder only).

How Soon Being an Authorized User Impacts Your Score

If the authorized user has no previous credit history, their first credit score should be generated within six months. This score could range anywhere from bad to perhaps even excellent, depending on how the account is managed in the meantime.

If it’s not the authorized user’s first credit account, the credit score ramifications are likely to reveal themselves as soon as the account appears on their credit report. The initial impact is likely to be negative, as is temporarily the case whenever a person opens a new credit account, but that will reverse itself with time and responsible use.

You can get a forecast specific to your situation by trying WalletHub’s free credit score simulator.

Learn more about how being an authorized user affects your credit score.

Pros and Cons of Being an Authorized User on a Credit Card

The decision to add an authorized user to your credit card necessitates carefully weighing the risks and rewards, as there are certainly a few of each.

Authorized User Pros

Valuable Experience

Becoming an authorized user not only enables people who cannot qualify for their own accounts to use a credit card, but it also helps them learn how to manage their money responsibly in a low-pressure, relatively low-risk way.

Credit Building

Most major credit-card companies report authorized users’ account information to the major credit bureaus each month. Assuming the information reflects responsible use, this process will help to improve the authorized user’s credit standing, perhaps elevating it all the way to the “excellent” range over time.

However, the gains aren’t likely to come as quickly as if the individual had their own credit card account. So for the best results, we recommend combining authorized use with a starter credit card, even if it’s secured.

Lack of Responsibility

Authorized users aren’t legally responsible for making payments, which means they shouldn’t be held accountable for the credit score ramifications of failing to do so. As a result, if the account is mismanaged and proves to be more of a credit score hindrance than a help, an authorized user has the right to simply request the account’s removal from their credit reports.

Convenience

It’s easier to put a credit card in your wallet than to make sure you’re always carrying enough cash. It’s also easier to manage a single credit card account than it is to keep tabs on a few different ones. The logistical advantages of plastic are therefore often a driving factor for authorized use, especially for families with underage children and couples who pool their money.

Emergency Spending

No one wants to leave a significant other or other family member stranded with no money for things such as gas, car repairs, alternative transportation or a hotel room. Adding that person as an authorized user on a credit card is one of the best ways to prevent that, especially when the authorized-user-to-be doesn’t have an independent income or much credit history.

Authorized User Cons

Liability

It’s important to realize that the primary account holder is legally liable for everything an authorized user does. In other words, when you agree to give another person access to your account, you also agree to pay for their purchases and deal with the consequences of their mistakes. You can make special, informal arrangements with your authorized user when it comes to payment and other logistics, but the buck ultimately stops with you.

Possible Credit Score Damage

There will be damage to the credit scores of both the primary account holder and authorized user if the primary account holder misses a payment or even defaults on the account. The same could be true if the authorized user abuses their account privileges, causing the primary account holder to have bill-payment problems.

Authorized users can find themselves with damaged credit due to the primary cardholder’s mistakes. If this happens, the authorized user can request removal from the account and then dispute the damaging info to remove it from their own credit report.

Possible Relationship Strain

If things go south, people will inevitably point fingers. Blame and resentment can corrode relationships, which means you shouldn’t add an authorized user unless you know that person to be financially responsible — or if you can bear the headache should they misbehave.

Learn more about the pros and cons of authorized users.

Adding Authorized Users to Credit Cards

Most credit-card issuers will allow you to add an authorized user over the phone, through a paper application form or online — with the last option being the simplest.

After you add an authorized user to an account, the new account should appear on their credit report by the end of the next billing cycle. So it could show up in just a few days or take about a month, depending on when in the card’s billing cycle the authorized user is added. The primary account holder’s credit report will not reflect the authorized user’s addition.

How to Remove an Authorized User

Removing an authorized user’s account access is just as easy as adding an authorized user. All the primary accountholder has to do is call and ask the bank or credit union to take the person’s name off the account. Alternatively, you may be able to remove the user by logging into your online account.

Removing the authorized user will revoke their access and deactivate their card. Authorized users can also remove themselves from the account by calling the card’s issuer.

Learn more about removing authorized users.

5 Tips for Awesome Authorized Use

An authorized-user arrangement is not without risks, so it’s important to carefully consider the following tips before dipping your toes in the authorized-user pond:

1. Pick the Right Creditor: Credit bureaus treat authorized users as owners of the accounts to which they are added. And though most major credit-card issuers report authorized-user activity to the credit bureaus each month, not all do. Smaller institutions, such as credit unions, are even more hit-or-miss.

2. Consider Lenders’ Credit-Score Preferences: The 1,000+ credit scores that are currently in use don’t approach authorized use the same way. VantageScore 3.0, for example, effectively considers only the good things, as you can request the removal of any negative information related to an account you’re authorized to use. FICO Score 9 heavily discounts information about authorized use relative to accounts for which you’re the primary accountholder. And some other scores ignore authorized use altogether. Unfortunately, it’s impossible to predict which scoring model an issuer will use — let alone if they’ve customized the score to their industry.

3. Make Contingency Plans: You don’t want to be surprised by anything your authorized user might do. So consider how you’d handle various situations that might arise — from overspending to refusing to pay you back for the payments you make — so that you can act immediately if necessary. Setting up account alerts for different types of worrisome transactions (such as a charge above $100) can be extremely helpful in this regard.

4. Have an Open Dialogue: It might be a good idea to schedule periodic sit-downs with your authorized user to discuss how things are going as well as what potential changes you might need to make to your arrangement. Ultimately, open communication is the key to avoiding mistakes and animosity.

5. Set a Good Example: Negative information won’t directly cost an authorized user, in the sense that the newest credit-score models only consider positive information from such accounts, if any info at all. Nevertheless, info that won’t count against an authorized user also can’t count in their favor. Every month your payment is late amounts to one fewer on-time payment on the authorized user’s credit track record.

If your child is the authorized user you have in mind, you also have to consider what type of example you want to set as one of their primary financial role models. There’s a good chance that what you do will be mimicked in some way down the road, so try to leave a fruitful legacy, instilling positive values, not familiarity with bad habits.

All in all, adding an authorized user – or becoming one – can be a good idea with great potential results. As long as you avoid the pitfalls, maximize the benefits, and set the right ground rules, whomever you add as an authorized user will enjoy a head-start in their credit building journey.

Alternatives to Being an Authorized User

Aside from becoming an authorized user on a credit card, there are a few other ways you can access borrowing power and make purchases without much difficulty. They include:

Co-signers: A co-signer helps you borrow money by promising to pay back any amount that you cannot. In addition, lenders weigh the co-signer’s credit history more heavily than yours during the application process, since they’re the one ultimately held responsible.

You can get a co-signer on a loan or a line of credit. Unfortunately, none of the top 10 credit card issuers allow co-signers anymore, but you might find options from smaller banks or credit unions.

It’s also worth noting that having a co-signer is one of the few ways minors can borrow money, aside from being an authorized user. Other options include credit-builder loans, student loans and borrowing from family and friends.

Secured credit cards: If you’re at least 18 years old, you can apply for your own secured credit card. A secured card requires you to put down a security deposit when you open the account. This deposit serves as collateral that the issuer can keep if you don’t pay back what you owe. Your card’s credit limit usually equals the amount of the deposit. As a result, secured cards are the easiest type of credit card to get, available even to people with no credit history or bad credit.

Unsecured cards for limited credit: There are plenty of unsecured credit cards you can get with no credit history, as long as you meet basic requirements like being at least 18 years old and having an SSN or ITIN.

Student credit cards: College students ages 18+ can qualify for student credit cards, which usually don’t require any credit history and offer better terms and rewards than other cards aimed at people with limited credit. You can continue to own these cards even after you graduate from college, too.

Credit-builder loans: A credit-builder loan works the opposite way of a regular loan. Instead of receiving money and then paying it back in monthly installments, the issuer puts money into a savings account, and then you make payments each month until you’ve paid the full amount plus a small amount of interest. At the end, you receive the money in the savings account.

The point of this type of loan is purely for building credit, as the lender reports your payments to the credit bureaus each month. You’ll have to decide whether the interest you pay is worth it compared to other methods of building credit.