What Does it Mean to be an Authorized Credit Card User?
In a nutshell, being an authorized credit card user means someone has authorized you to use their credit card account. If you're added to a credit card account as an authorized user, you will receive a credit card in your name, linked to the primary account owner's account, and you will be considered a secondary account holder.
While authorized users are considered account holders, they are not responsible for ensuring financial obligations to the credit card company are satisfied – meaning they don't generally receive the account statement and aren't legally responsible for paying the amounts due. That is the responsibility of the primary account holder. The primary account holder also receives the credit card statement.
Even though an authorized user isn't responsible for the financial obligations on the account, they can be impacted by whether or not the account is paid on time. Since they are considered account holders, any activity on the account that is reported by the creditor to any of the major credit bureaus will appear on the authorized user's credit reports. If the primary account holder pays as agreed, it can help an authorized user establish or build a positive credit history. If they don't, however, it can have a negative impact. Depending on the credit scoring model, credit scores may also be impacted.
Authorized users generally do not have the same account privileges as the primary account holder – they generally cannot make changes to the account, such as requesting a credit increase or adding other authorized users.
Before you become an authorized user on someone's credit card account, or before you allow someone to become an authorized user on yours, here are some things to keep in mind.
What should you know before becoming an authorized user?
Being an authorized user can be one way to establish responsible credit habits. Some parents will add their children as authorized users to help them establish and build a credit history. Some couples will also add each other as authorized users on an account.
But "you are going to inherit the credit of that cardholder" – for better or worse, said Jennifer Cox, Equifax chief client officer, who has worked in the credit card industry for decades. If you are considering becoming an authorized user on someone else's account, it's a good idea to discuss their credit situation with them.
What should you know before adding an authorized user?
If you're considering adding an authorized user to your credit card, it's important to realize that you will be financially responsible for any purchases they make. As the primary account holder, it's important to know that your credit and finances could be at risk if an authorized user increases the amount you owe. While you can remove an authorized user at any time, as the primary account holder, any charges they make remain your responsibility.
It can be helpful to have a plan set up beforehand for card usage, Cox said. If you're a parent considering adding a child as an authorized user, take some time to discuss it and make sure they know how credit and credit cards work.
Some card accounts allow you to set a limit on the amount an authorized user can spend on the card, or set online access levels for an authorized user – they may only be allowed to make payments or review recent charges, for instance. Contact the credit card company to find out more information on what authorized users can or can't do on your account.
Most importantly, Cox said,"make sure the authorized user status works for both parties over time." If it doesn't, take steps to end the arrangement.
To remove an authorized user, call the credit card company and ask for removal. If you want to remove yourself as an authorized user, you may be able to call and request it, depending on the lender.