Everything That You Wanted to Know for Adding Authorized User to Credit Card

Adding an authorized user to a credit card can have several practical advantages for the card owner as well as for the authorized user. It can offer shopping convenience or emergency funds to your family members, and credit building assistance to those you want to help. For you, it can help keep your credit card active and your credit score in good standing.

Here are a few things that you always wanted to know for adding authorized user to credit card:

What is an authorized user?

An authorized user is someone who is not the primary account holder of a credit card, but has their name on it and can legally use it. They may have it and can use it to make purchases or pay bills. The card usage will show up in the account of the primary holder when it comes to billing. However, the card issuers will usually—you should confirm with them that they will do so—report the authorized user as an independent user to the three bureaus—Experian, Equifax, and TransUnion.

The card usage and history will go into creating the authorized user’s credit file and will have an impact on their credit score.

How can an authorized user build credit?

If you want to help someone build credit, adding them to your primary credit card account can be one of the fastest ways of doing so. By listing your children, teenagers, or young adults as authorized users on your credit card, you can make sure that they have a positive credit history. It will boost their credit scores and will make them eligible for credit cards and loans when they are finally ready to spread their wings.

There are credit building agencies that also help people build credit by adding them to an existing credit card. In this case, the authorized user won’t get access to it and can’t use it to make payments, but the primary user’s financial activity will show up in their credit report as well. Since the agency will ensure that this usage will be positive, with the balance kept well within the allowed limit and the payments made on time, the authorized user will get a favorable credit report and will see a definite increase in their credit score.

Having a high credit score will make them seem creditworthy to potential lenders, and they will be more likely to approve them for the applied loans.

How does adding an authorized user affect the primary cardholder?

If the primary cardholder is a credit building agency, they will benefit from getting a fee from their clients for providing the service. Regular credit cardholders will benefit from keeping their credit account active. Other than that, the primary cardholder remains legally responsible for all the financial transactions that take place using their credit card.

Are there any disadvantages to adding an authorized user?

You should keep in mind that as the primary account holder, you are responsible for making the payments on your credit card. Your authorized users are under no such obligation. So, if they make expensive purchases with the card and drive up your balance to the maximum limit, you will have to deal with the consequences. If you are unable to pay the balance in full every month, it will increase your credit utilization ratio, and that will negatively impact your credit score.

That is why it is crucial that you only add people to your credit card who you can trust to be financially responsible. It will help to have a talk about finances with your children, spouse, and other family members and explain your expectations regarding their card usage. You should make sure that they understand how their authorized card usage will impact your credit score and how that can affect you.

If they don’t comply with your rules, you will need to remove them. Fortunately, as the primary credit cardholder, this isn’t difficult. You can do that at any time by calling the credit card holder and asking for their removal.

Hopefully, this information will help you decide if you should or shouldn’t decide on adding an authorized user to a credit card.