Whether you’re adding someone onto your credit account or you’re the one being added, there are a few things to consider before you pull the trigger. The idea of being added as a secondary user to a credit card account might sound strange, but there are real-world benefits that come with it. So long as you understand your privileges and responsibilities, you can use the authorization in the best possible way.
What Does it Mean to be an Authorized User?
In order to understand how the process works and whether or not this is the right option for you, you need a full picture of each person’s role relative to the account:
Who is the primary holder?
The primary holder is the person that holds the account. This individual opened the credit card account and is the person responsible for the payments. The credit cycle of the card impacts the credit profile of the primary holder.
What are authorized users?
An authorized user is someone who gets a card that is linked to the account of the primary holder. Because they are piggy-backing off of the credit account of the primary, the authorized user doesn’t need to meet the same financial criteria. This means that an authorized user can have faulty credit or be in a heavy amount of debt. The primary is entirely responsible for the use of the credit card. An authorized user gains access to the benefits seen by the primary cardholder. This refers to the credit limit as well as any associated discounts or perks the credit card gives you access to.
Who can be an authorized user?
Depending on the credit account, you can have an authorized user that is beneath the age of majority. Functioning as a part of the primary’s credit account, it is a popular way to give financial access to children. Other situations where an authorized user may be named include giving credit access to employees.
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What are their responsibilities?
As an authorized user, it is important to understand your freedoms and responsibilities pursuant to the role of an authorized user. The main thing to understand is that they are eligible to make purchases within the credit limit. However, despite that freedom, the authorized user is not responsible for repaying the money. While there are benefits to this kind of financial access, the disadvantage is that the credit account doesn’t apply to the credit score of the authorized user, only of the primary.
Authorized Users v.s. Joint Credit Card Users (Co-borrowers)
When you’re considering getting a joint credit account, there are a few things that you should keep in mind. The freedoms and responsibilities of a joint account holder differ from those of an authorized user significantly.
Joint Credit Card Users
A joint account holder applies for the credit card with another user. Both are referred to as co-borrowers. As a result, both parties must meet the financial criteria needed to qualify for the account. This means that both co-applicants must have a sufficient credit score and independently qualify for the account.
All of the account holders are fully responsible for the money owing on the credit account. This means that the liability applies, in full, to both parties linked to the account. Both are equally responsible for making payments and will incur the same penalties upon default.
| Joint User | Authorized User | |
| Who is responsible for the money owed on the credit card? | The joint user is responsible for the card balance. | The authorized user is not held responsible for the debt. |
| Who reaps the benefits of the credit card? | Credit score improvement and cash-back or point benefits are enjoyed by the joint user. | Discounts and credit limit benefits are enjoyed, though there is no impact on their credit score. |
| Do approval requirements need to be met? | Yes, the requirements must be met. | No, authorized users need not meet the criteria. |
| Can you build credit? | Yes, if properly used, the card can build credit. | No, even when used correctly, it won’t apply to the credit score. |
| Who can be a user? | A co-applicant who qualifies for the credit card independently. | Family members or individuals who are the age of majority (minors are sometimes allowed). |
Can You Build Credit as an Authorized User?
No, authorized users are unable to use the credit card access to grow their credit. This is because they are not held responsible for making payments. The nature of using a line of credit to grow your score is through the responsibility showcased by making payments. Since authorized users don’t technically have this responsibility, using the card won’t affect their credit score (whether negatively or positively).
Can You Build Credit as a Co-borrower?
Yes, since a co-borrower or joint account holder has the same rights and responsibilities as the other account holder, the card applies to their credit score. Since co-borrowers are responsible for making payments, the payment history contributes to their credit profile. If payments are made regularly and on time, this can have an overall positive result. Conversely, if there is a default, the full penalty will apply to the credit score of all account holders.
Pros and Cons of Adding an Authorized User to a Credit Card?
Primary Cardholder
The primary cardholder has a lot to consider before adding an authorized user to their credit account. As with any financial decision, it comes with some inherent risks and some potential advantages. The primary cardholder should consider these on a case-by-case basis.
Pros
- Earn more points. Whether your card earns you cash-back rewards, Air Miles, etc., the more the card is used, the more points will accrue. This is particularly useful for card arrangements designed with a lot of incentives.
- Money management. Depending on the situation, instead of giving cash to spend, an authorized user’s spending is isolated in a specific location. This lends an opportunity to budget and analyze spending patterns. This is specifically true for a parent trying to teach their child about credit and money management.
Cons
- Supplemental card fee. In most cases ordering an extra card and placing another user on the account comes with an added cost. Though not a massive investment, this added expense can be a drawback to adding a user to your account.
- Financial liability. The account holder is fully responsible for all of the funds owing on the card, regardless of whether the authorized user spent the money. This adds a level of risk and, depending on the situation, may require a lot of oversight.
Authorized User
The authorized user has far fewer responsibilities than an account primary. However, there are fewer long-term benefits to being an authorized user than a primary. To decide if being added as an authorized user is a good decision, there are a few things to consider.
Pros
- Can make purchases. A lot of purchases and rentals require a credit card. Whether shopping online, renting a car, or visiting a hotel, being an authorized user gives the opportunity to make these purchases.
- Learning experience. For younger or less experienced credit users, being an authorized user is a good way to learn about finances. It poses the opportunity for parents to teach about interest, minimum payments, scheduled payments, and fiscal responsibilities.
- Adds to points. Though the authorized user won’t necessarily see the benefits of this step, it is a good incentive to the primary. By having multiple individuals spending on the account, the primary user can gain more points.
Cons
- Can’t redeem points. Though the authorized user can add to the point total, they are not able to actually use the points. At most, it is there to incentivize the account holder to add the user to the account.
- Doesn’t build credit. The most noticeable drawback is that, if you are an authorized user, your use of the credit card doesn’t contribute to your credit profile. As a result, if this is the main card you use, it can result in stagnant (or non-existent) credit. This can hinder your ability to get your own card at a later date.
Bottom Line
Getting added as an authorized user offers many advantages in terms of convenience. It gives you access to a credit card if you are unable to access your own. The ability to use the card can benefit the primary user in terms of points and credit, though is strictly a benefit to the authorized user in terms of access. Provided you are able to communicate regularly with the primary account holder and are not looking to use it as a credit-growing strategy, it is a fairly low-risk opportunity.
