How Does an Authorized User Work?
When a primary cardholder adds an authorized user, they contact their credit card issuer with the individual’s personal information, typically their name and date of birth. The issuer then sends a new card to the authorized user with their name on it.
While the authorized user can make purchases, they are not legally responsible for the debt. The primary cardholder remains solely liable for all charges on the account, including those made by the authorized user. This distinction is crucial and is what separates an authorized user from a joint account holder.
For credit-building purposes, the arrangement’s effectiveness depends on the card issuer’s reporting practices. Most major issuers report the account’s history—including the payment record, credit utilization ratio, and account age—to the major credit bureaus (Experian, Equifax, and TransUnion) for both the primary cardholder and the authorized user. A history of on-time payments and low balances on the primary account can positively influence the authorized user’s credit score.
However, this can also be a risk. If the primary cardholder makes late payments or maintains a high balance, it can negatively impact the authorized user’s credit.
Who Should Consider Becoming an Authorized User?
This arrangement is particularly beneficial for certain individuals:
- Teens and Young Adults: Parents can add their children to an account to help them build credit early. It serves as a practical introduction to credit management with a built-in safety net.
- Spouses or Partners: If one partner has a stronger credit history, adding the other as an authorized user can help them improve their credit profile and simplify managing shared household expenses.
- Individuals Rebuilding Credit: For those who have experienced financial difficulties, becoming an authorized user on a well-managed account can be a stepping stone toward re-establishing good credit.
Authorized User vs. Joint Account Holder vs. Co-signer
It’s important to understand the differences between these roles, as they carry different levels of responsibility.
| Feature | Authorized User | Joint Account Holder | Co-signer |
|---|---|---|---|
| Legal Responsibility for Debt | None | Full and equal | Full (if primary borrower defaults) |
| Account Ownership | None | Shared | None |
| Account Control | Limited to spending | Full control for both parties | None |
Tips for Primary Cardholders and Authorized Users
For Primary Cardholders: Adding an authorized user requires trust. Remember that you are fully responsible for any charges they make. It’s wise to set clear spending expectations and monitor account activity. If the goal is to help someone build credit, alternatives like a secured credit card might offer more independence without risk to your own credit.
For Authorized Users: Respect the trust placed in you. Adhere to any agreed-upon spending limits and communicate openly with the primary cardholder. You should periodically check your credit report to ensure the account is being reported and is positively impacting your credit history. You can get a free copy from AnnualCreditReport.com.
For more information, the Consumer Financial Protection Bureau (CFPB) offers resources explaining the rights and responsibilities of authorized users.
Frequently Asked Questions
Can an authorized user be removed from an account?
Yes. The primary cardholder can remove an authorized user at any time. In most cases, an authorized user can also request to be removed by contacting the credit card company directly.
How long does it take for an authorized user account to appear on a credit report?
It typically takes 30 to 60 days, or one to two billing cycles, for the account to show up on an authorized user’s credit report and potentially affect their credit score.
Do all credit card companies report authorized user activity?
While most major issuers do, some do not. If credit building is the primary goal, it is important to confirm the card issuer’s reporting policy beforehand.
