Whether you’re adding someone to your credit account or you’re the one being added, there are a few things to consider before you do so. While adding an authorized user to a card may have benefits for the person being added, there are some risks for the primary cardholder.
So long as you understand your privileges and responsibilities, you can use the authorization in the best possible way.
Key Points On Authorized User To A Credit Card
- Authorized users can use another cardholder’s credit card to spend on credit and build credit history.
- Authorized users aren’t responsible for credit card payments.
- The main cardholder is fully liable for the debt, including whatever is spent by the authorized user.
Primary User vs. Authorized Users vs. Joint Credit Card Users
To understand what it means to add an authorized user, 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 who 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 (a.k.a., supplementary cardholder or additional cardholder) is someone who gets a card that is linked to the account of the primary holder. Because they are piggybacking off of the credit account of the primary cardholder, the authorized user doesn’t need to meet the same financial criteria and is not responsible for the account.
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.
What Is A Joint Account Holder?
A joint account holder (a.k.a., secondary cardholder or co-borrower) 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.
Moreover, all the account holders are fully responsible for the money owed 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.
Who Can Be An Authorized User?
Anyone can be added as an authorized user on a credit card, including friends, family members, business partners, or employees, depending on the credit card provider’s criteria. For example, there may be specific age requirements to be added as an authorized user.
| Note: There may be a fee for adding an additional cardholder. |
What Are The Responsibilities Of An Authorized User?
Authorized users typically have no responsibilities, including not being liable for repaying the money. However, certain factors authorized users should keep in mind to ensure they’re acting respectfully and not putting the primary cardholder in a precarious position:
- Use The Credit Card Responsibly: Only make purchases that the primary cardholder agrees to or allows.
- Cover Your Own Payments: Whatever you spend on credit, you should repay yourself.
- Stay Within Healthy Credit Limits: Spending too much on credit can hurt the primary cardholder’s credit score and your own. So, it’s best to keep expenditures well below 30% of the credit limit (or below the threshold established by the primary cardholder).
- Be Transparent With The Cardholder: It may be a nice gesture to let the cardholder know whenever you decide to use the credit card for certain purchases, especially large ones.
Major Differences Between A Authorized User And A Secondary Cardholder
| Secondary Cardholder | Authorized User | |
| Who is responsible for the money owed on the credit card? | All users are responsible for the card balance. | The authorized user is not held responsible for the debt. |
| 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 |
| Who can be a user? | A co-applicant who qualifies for the credit card independently. | Family members or individuals who meet the creditor’s minimum age requirement. |
Can You Build Credit As An Authorized User?
As an authorized user (a.k.a., supplementary cardholder or additional cardholder) you’re not the owner of the account and you’re not legally responsible for the credit account. As such, any purchases you make on the account are not reported on your credit report and won’t help you build credit.
For more information visit the Government of Canada website.
Can You Build Credit As A Secondary Cardholder?
Yes, since a secondary cardholder (co-borrower or joint account holder) has the same rights and responsibilities as the other account holder, the card applies to their credit score. Co-borrowers are responsible for making payments, so 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 For The 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. 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. Cardholders can track and limit the authorized user’s spending. This lends an opportunity to budget and analyze spending patterns, especially for parents trying to teach their children about credit and money management.
- Convenience. This arrangement allows family members to share the credit card for joint expenses.
Cons
- Financial Liability. The account holder is fully responsible for paying off the balance 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.
- Potential Effect On Credit. Late payments or high balances can hurt the primary cardholder’s credit score.
- Additional Fees. Some credit card providers charge fees for adding authorized users.
Pros And Cons Of Being An Authorized User On A Credit Card
The authorized user has far fewer responsibilities than an account primary, along with key perks to take advantage of. To decide if being added as an authorized user is a good decision, there are a few things to consider.
Pros
- Make Purchases On Credit. Many 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 complete these transactions.
- 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.
Cons
- No Ownership. You’re limited to what the primary cardholder does with the account in terms of how the card is used and credit building.
Bottom Line
Getting added as an authorized user can provide you with the convenience that comes with credit card spending. However, you’re limited to how the primary cardholder uses the card. Eventually, if the card is managed responsibly, you may be able to build a healthy credit score that can help you secure your own card in the future.
