Last updated on June 10th, 2020
Adding an authorized user on your credit card account can be as beneficial to your credit score as it can be harmful. While the process itself is relatively easy, the effects of having one on your credit card can leave marks on your credit report for years to come, so finding a trustworthy person is key. If you’re curious about how to add an authorized user to your credit card and what it can mean for you, read on.
What is an authorized user?
In the world of credit cards, an authorized user is a secondary user for a credit card that receives a card with their own name on it. The purchases they make with this card reflect on the same statement as the primary account holder and shares the same credit limit. It’s worth noting that there are a few differences between being an authorized user on a credit card and being a joint account holder. Authorized users can be added to a credit card at any time, do not have to go through a credit check, and are not financially responsible for paying any debts owed. Joint account holders, on the other hand, must apply at the same time as the other users and have the same legal responsibility to pay back balances on the card.
A couple with a joint account who breaks up may not be able to have as clean of a break as they’d like, as both parties are still liable for the balance on the card. Any negative effects as a result of using the card will also remain on both partners’ credit reports until the credit reporting time limit has expired, which is 7 years for most negative info per the Fair Credit Reporting Act.
How do I add an authorized user to my credit card?
There are surprisingly very few steps involved when you want to add this user type to your credit card. Many major credit card issuers can assist you in the process over the phone or online in just a matter of minutes. To complete the process of adding an authorized user to an existing credit card account, all you need to do is provide their personal information. Once submitted, the authorized user will receive a credit card in their name in the mail complete with the terms and conditions and (in some cases, most of but not all of) the buying power of the primary account holder’s card. That said, there are pros and cons to this process that you should be aware of as the primary account holder.
What are the pros of adding an authorized user to my credit card?
Adding an authorized user to your credit card is a very generous gesture. Without so much as filling out an application themselves, the family member, employee, or another person that you choose to add to your account will be able to make purchases with a credit card even if they were declined their own separate card in the past. Depending on the card, their purchases may also earn points and cash back benefits that you can capitalize on down the road. An authorized user’s credit score can also improve over time if they and the primary account holder show responsible spending habits. Not all issuers give information about authorized users to the three major credit bureaus though, so if you are hoping to help someone gain their financial footing, check with your credit card issuer first.
What are the cons of adding an authorized user to my credit card?
In certain situations, adding this type of user to your credit card can have quite negative effects for both you and them. Any mistakes that you make while using your credit card will damage the authorized users’ credit score, such as having a high credit utilization ratio (spending close to your credit limit) and outright missing payments. The primary account holder is responsible for all of the charges and fees with the card, including the annual fee and foreign transaction fees, even if they aren’t making purchases with it.
If you don’t trust the authorized user you want to add to your credit card, other financial products may be a better option. Someone with a poor credit score that was unable to qualify for their own unsecured credit card may still be able to qualify for a secured card. Before you add an authorized user to your credit card, consider the good and bad of the other person’s financial habits and how it would affect your own credit score. So long as you trust them wholeheartedly, they’ll only be helping you earn points on your card at an even faster pace.