The Ultimate Guide to Credit Cards
Saturday, June 15, 2024

What is an Authorized User? A Guide to the Pros, Cons & Legal Responsibilities

What Is An Authorized User
Eric Bank

Written by: Eric Bank

Eric Bank
Eric Bank

Eric Bank is an M.B.A. who has covered financial and business topics since 1985, appearing regularly on Credible, eHow, WiseBread, The Nest, Zacks, Chron, BadCredit.org and dozens of other outlets. Eric specializes in taking complex subject matters and explaining them in simple terms for consumer audiences, particularly in the world of personal finance. Eric holds a Master's in Business Administration from New York University and a Master's in Finance from DePaul University.

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Edited by: Amber Brooks

Amber Brooks
Amber Brooks

Reviewed by: Andrew Allen

Andrew Allen
Andrew Allen

For nearly 20 years, Andrew has worked for financial institutions ranging from regional investment organizations to some of the largest banks in the world. At Wells Fargo, Andrew was a Consultant within the Insight and Innovation division. A graduate of the University of Georgia’s Terry College of Business, Andrew’s goal has been promoting personal financial wellness and solid money decisions.

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Opinions expressed here are ours alone, and are not provided, endorsed, or approved by any issuer. Our articles follow strict editorial guidelines and are updated regularly.

An authorized user on a credit card is someone the primary cardholder adds to their account. As an authorized user, you can use the credit card just like the person who owns the account, but you don’t have to apply for the card yourself. 

The primary cardholder is still the one responsible for paying the bill. You get your own card with your name on it and can buy things or pay bills just like you would with any other credit card.

In this article, we’ll describe how to become an authorized user, the pros and cons of doing so, the legal responsibilities of authorized users, and other things to consider. Let’s dive in!

The Basics of Being an Authorized User

Becoming an authorized user on a credit card lets you use someone else’s credit account without applying for your own credit card. This can help you start building a good credit history, which is important for your financial health.

How to Become an Authorized User

Becoming an authorized user is not that difficult, as long as you approach the right cardowner. The account owner can add a spouse, child, parent, or friend as an authorized user. 

Here’s a step-by-step guide:

  1. Ask for Permission: Start by asking the cardowner to add you as an authorized user. Provide reasons why you would like to take this step.
  2. Contact the Credit Card Company: The primary account holder requests that the credit card company add you as an authorized user. You can make the request online or via a phone call to customer service.
  3. Check Age Requirements: The minimum age is normally 13, but some cards have no minimum, and others set it at 15 or 16.
  4. Provide Information: The issuer will need certain information about the authorized user, including full name, contact info, date of birth, and Social Security number. 
  5. Set Clear Usage Guidelines: Finally, make sure you and the cardholder are crystal clear about how you can use the card. Pay attention to any restrictions on your card use, including spending limits and access to cash advances. 

Once you become an authorized user, you have a golden opportunity to establish and build your credit. Please don’t blow it by acting irresponsibly. 

Responsibilities and Liabilities 

Being an authorized user comes with specific responsibilities, and certain actions can impact the credit scores of both parties. You need to understand these when you become an authorized user on someone else’s credit card. 

The following chart summarizes the key items each of you should consider when you become an authorized user:

PRIMARY ACCOUNT HOLDERAUTHORIZED USER
Payment ResponsibilityFully responsible for all charges on the account, including those made by the authorized user.No legal obligation to pay, but it should coordinate with the owner on spending.
Credit Score ImpactIt may be affected if the card’s credit utilization increases or if the authorized user overspends and payments are missed.Benefits from the owner’s good credit habits but can be negatively affected by high utilization or missed payments.
Spending LimitsCan set spending limits specifically for the authorized user’s transactions.Subject to any spending restrictions set by the primary account holder.
Spending OversightMust monitor the spending on the card to ensure it stays within manageable limits.Should communicate about purchases and agree on spending limits with the owner.
Account ManagementHolds the power to add or remove authorized users and has full access to the account management features.Typically has limited access to account management; cannot amend the account status.
Debt LiabilityLegally responsible for any debt accumulated on the account.Not legally responsible for debts unless agreed otherwise in private arrangements.

As the chart makes clear, communication about spending is crucial. The primary account holder is ultimately responsible for paying the bill. 

Most credit cards allow the cardowner to set individual spending limits for each authorized user.

Pros and Cons of Being an Authorized User

Being an authorized user of a credit card can be a great way to establish or build your credit score. But it also comes with potential downsides. 

Here’s a detailed look at the benefits and drawbacks:

Benefits

  • Establishing or Rebuilding Credit: The credit card will report your and the cardowner’s activity to the credit bureaus. A well-managed account can help you establish or rebuild your credit.
  • Piggybacking on a Good Credit History: You benefit from the primary account holder’s credit history, which can help improve your credit score.
  • Access to Credit Without Full Responsibility: You can make purchases and enjoy the benefits of a credit card without being legally responsible for paying the bill, as that is the primary cardholder’s obligation.
  • Learning Financial Responsibility: Being an authorized user can teach you about responsible credit management and good spending habits. 
  • Access to Exclusive Cardholder Discounts and Rewards: You can enjoy some of the perks that come with the credit card, such as discounts on purchases or access to airport lounges.

Drawbacks

  • Credit Score Dependency: Your credit score is partially dependent on how the primary account holder manages the account. Poor handling can harm your credit.
  • Primary Account Holder’s Actions Can Harm Your Credit: If the primary account holder misses payments or maxes out the card, it will negatively impact your credit report.
  • Effects of High Credit Utilization on Credit Scores: High credit utilization, especially if either of you frequently maxes out the card, can lower both your credit scores.
  • Limited Control Over Account Management: You can’t change the card’s credit limit or other account details. You can’t close the account or authorize additional users.

Despite the drawbacks, becoming an authorized user is a pretty sweet deal. It is an excellent way to start your credit journey because it offers the opportunity to build your credit history and learn about responsible credit management.

Responsibilities of the Primary Account Holder

The primary account holder must be fully aware of the potential risks and responsibilities that come with authorizing additional accounts. They bear the financial liability for all charges, including those made by the authorized user. 

This underscores the need for vigilant oversight of the shared account to avoid any unforeseen financial burdens.

Financial Liability

The primary account holder is responsible for all charges on the card, including their own purchases and those made by authorized users. 

They need to monitor spending to ensure it stays within a manageable range. The primary holder is accountable for making all payments on time, no matter who spent the money. 

This is important because late payments can lead to extra fees, higher interest rates, and a drop in credit scores. The way the card is managed affects the credit scores of both the primary holder and the authorized user.

late payment graphic

Keeping the balance low and making timely payments will help improve credit scores, but letting the balance get too high or missing payments can hurt them. The credit card company reports the account activity to credit bureaus under both names.

Communicating Expectations

The cardowner must explain to authorized users what they can do with the card. This includes spending limits and unacceptable purchases (e.g., gambling, tobacco, etc.).

The cardowner should review each monthly statement to make sure there aren’t any unexpected or unauthorized charges. 

The cardholder may have to remove an authorized user if they abuse trust. It may be emotionally difficult to do, but taking away the user’s card can save a lot of financial grief.

What to Consider Before Becoming an Authorized User

Frequently, authorized users are credit newbies. That’s why it’s important to understand how it works. It’s all too easy to jump at the opportunity to have your first credit card without realizing the responsibilities it entails. 

The following should help prepare you for the realities, both good and bad, associated with becoming an authorized user.

Trust and Financial Responsibility

When thinking about becoming an authorized user on someone else’s credit card, the most important thing is trust. You need to have a strong trust relationship with the primary account holder because their actions affect your credit (and vice versa). 

Both of you need to be clear about who will spend what and how to pay the bills. This is crucial because any mistakes in managing the account can hurt both of your credit scores.

Potential Impact on Credit Scores

Being an authorized user can either help or hurt your credit score. If the primary account holder uses the card responsibly, keeps the balance low, and pays on time, the authorized user’s credit score could improve. 

However, if they miss payments or max out the card, it could harm the authorized user’s credit. Consider if the benefits outweigh the risks. 

The other side of the coin is just as important. If you’re an authorized user, you must be mature enough to accept the cardowner’s rules about spending and paying your fair share. 

The relationship is uneven: The authorized user can use a credit card without the legal responsibility to pay the bill. Failure to meet those payment obligations may stick the cardowner with a bill they can’t pay, and that could hurt both individual’s credit scores.

Selecting the Right Credit Card

Not all credit cards are ideal for adding an authorized user, especially if you’re hoping to maximize the benefits. Here’s what to consider when agreeing to use a particular card:

  • Credit Reporting: It’s most efficient if the card reports to all three credit bureaus. This ensures that your credit reports reflect all account activity.
  • Credit Utilization and Payment History: Avoid becoming an authorized user on a card with a history of high balances and/or late payments. That’s a sure way to hurt your credit.
  • Fees and Interest Rates: You want a card that has reasonable fees and interest if you cost-share with the cardowner. 
  • Other Benefits: Check out any benefits that can help you, such as discounts on selected purchases or travel perks.

By considering these factors first, you’ll have better odds of benefiting as an authorized user.

How to Remove an Authorized User

You may have to remove an authorized user from your credit card. Let’s face it – sometimes you trust a person who doesn’t have the required maturity and sense of responsibility. When red flags pop up, you need to act fast. Here’s what to look for and how to proceed.

When Removal May Be Necessary

Unexpected large purchases or prohibited purchases are both key signs that the authorized user isn’t abiding by the initial agreements. Also, it’s alarming if you discover purchases of online porn or gambling, especially if you already ruled these out. 

Keep an eye on your unpaid balances. Did the authorized user agree to send in payments to cover their own expenses? Not fulfilling that arrangement can unexpectedly dump a load of debt on your shoulders. 

This may mean you can’t afford to pay your entire monthly balance – interest charges will follow, and even the best credit cards have relatively high APRs.

In addition, high balances raise your credit utilization ratio (i.e., credit used / credit available). Any ratio above 30% can damage your credit score, even if the authorized user is the culprit.

CUR example table
The above illustrates the CUR for a person with three credit cards.

Another big no-no is when the authorized user starts taking cash advances against your clear prohibition. These advances incur interest from Day One, and the APR may be higher than that for purchases. One wayward ATM withdrawal can drain your credit line and leave you high and dry.

You don’t have to be a genius to recognize when it’s time to cut ties with an authorized user. It may be unpleasant, but at least the process is easy.

Removal Process

Removing an authorized user doesn’t take much effort. The cardholder can do so at any time and for any reason. It’s fairly simple to do:

  1. Call the issuer’s customer service number. You’ll find it on the back of your credit card or on the website.
  2. You’ll have to answer a few questions to verify that it’s really you.
  3. Instruct the rep to remove the authorized user. Provide any information the rep needs.
  4. Request that the removal occur immediately and double-check the authorized user’s card status. Get the removal action in writing to prevent further issues.
  5. Keep records of all interactions with the credit card issuer about this removal. Note the date you called, the representative’s name, and any confirmation numbers or emails you receive.

Following these steps will help ensure the successful removal of an authorized user and have a record of the action.

Becoming an Authorized User Can Help You Gain Your Credit Footing

Becoming an authorized user on someone else’s credit card is a good way to start building your credit. When you become an authorized card user, the credit card history shows up on your credit report. 

If the card owner has a history of paying on time and not using too much of the credit limit, it can help improve your credit score. This makes it easier for you to get loans and credit cards later on.

But it’s important to be careful about which account you join. If the primary account holder doesn’t pay on time or uses too much of the credit limit, it could hurt both your credit scores

You need to trust each other and clearly agree on how to use the card responsibly. Being an authorized user can help build your credit – as long as you both manage the card well.