When you have poor or limited credit, getting a credit card with the best features and benefits can be challenging. However, there is a solution that can help you build or establish credit while enjoying premium perks: becoming an authorized user on someone else’s credit card.
But before you decide whether to become an authorized user, it’s important to understand the pros and cons. Let’s take a closer look at what it means to be an authorized user on a credit card and the benefits and potential drawbacks associated with it.
What is an authorized user on a credit card?
An authorized user is someone who is added to another person’s credit card account. As an authorized user, you can use the credit card as if it were your own, but you don’t have any legal responsibility for the debt. You also gain access to most of the credit card’s benefits, such as airport lounge access, rental car protection, purchase protection, and other perks. However, there are some limitations. For example, authorized users typically cannot redeem rewards, request a credit line increase, close the account, or add another authorized user.
Pros of becoming an authorized user
1. Get easy access to a credit card.
Once you are added as an authorized user, you have immediate access to the credit card without needing to go through a credit inquiry or qualify for a new account. This can be beneficial if you have limited or no credit history.
2. Build credit quickly.
Authorized users benefit from an established credit line and positive payment history. If the card has a good payment history, a low credit utilization, and is several years old, it can help build your credit quickly. This can be especially helpful if you’re trying to establish credit for the first time.
3. Help a friend or family member keep an active card open.
By using the credit card regularly and making payments each month, you can help a friend or family member keep their credit card active. This is important because some issuers may close credit cards or reduce their credit limit if they aren’t used regularly. By keeping the card active, you are also helping to maintain or improve the primary cardholder’s credit score.
4. Help a friend or family member earn rewards.
In addition to offering rewards on purchases made by the primary cardholder, many rewards credit cards also offer rewards on purchases made by authorized users. Although these rewards can typically only be redeemed by the primary cardholder, it’s still a great way to help someone you know earn rewards on their spending.
5. Track family spending in a single account.
If you’re managing a family budget, adding an authorized user can help you track all of your family’s expenses in a single account. This makes it easier to see where your money is going each month and avoid budget leaks.
Cons of becoming an authorized user
1. It could cause conflict with your family/friends.
As an authorized user, you are not responsible for repaying the charges made with the credit card. However, if you charge a substantial amount and struggle to pay your portion of the bill, the primary cardholder will have to cover it. This could potentially strain relationships if conflicts arise over finances.
2. The account holder’s delinquent payments will show up on your credit report.
On the flip side, if the primary cardholder has financial issues such as late payments, a charge-off, or a bankruptcy, it could appear on your credit report as well. These negative items could lower your credit score and make it harder for you to qualify for your own credit card in the future.
3. The account holder can remove you at any time.
As an authorized user, you are not an account owner, which means the primary cardholder has the authority to remove you from the account at any time. If you are unaware of the removal, it can be embarrassing if you try to make a purchase using the card and it’s declined.
4. There may be an extra fee for it.
While some credit cards allow authorized users at no additional charge, others may require an authorized user fee each year. Although this fee is typically less than the primary card’s annual fee, it’s still an additional cost to consider.
Which credit card companies report authorized users?
It’s important to note that being an authorized user can help you build your credit history, but not all credit card companies report authorized users to the credit bureaus. Here are some recommended cards from major issuers that do report authorized users:
- American Express: The Platinum Card® from American Express, American Express® Gold Card
- Bank of America: Bank of America® Customized Cash Rewards credit card, Bank of America® Premium Rewards® credit card
- Capital One: Capital One Venture X Rewards Credit Card, Capital One SavorOne Cash Rewards Credit Card
- Chase: Chase Freedom Unlimited®, Chase Sapphire Reserve®
- Citi: Citi Double Cash® Card, Citi Premier® Card
- U.S. Bank: U.S. Bank Altitude® Go Visa Signature® Card
- Wells Fargo: Bilt Mastercard®, Wells Fargo Active Cash® Card
Make sure to check with the credit card company to confirm their policy on reporting authorized users.
How many authorized users can be on a credit card?
The number of authorized users you can add to your card depends on the issuer, and there may be a minimum age requirement. For example, Discover requires authorized users to be at least 15 years of age. Additionally, there may be an annual fee for each authorized user account.
Adding an authorized user to a credit card
The exact process of adding an authorized user may vary among card issuers, but here are the general steps:
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Find someone who is willing to add you as an authorized user. Discuss how you’ll use the card and make payments, and inquire about any fees or benefits associated with being an authorized user.
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Provide your full name and date of birth to the primary cardholder. Some card issuers may also require a Social Security number.
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The primary cardholder will contact the credit card company to add you as an authorized user.
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The card issuer will then mail your new card to either the primary cardholder or directly to you, depending on their process.
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Once you receive the card, activate it either online or over the phone.
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Create your online profile, which will allow you to monitor transactions and make payments.
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Start using the card for everyday purchases or emergencies. However, it’s important to communicate with the primary cardholder about your available credit limit and how you plan to use the card.
Alternatives to adding an authorized user
If you want to help someone establish or improve their credit but don’t want to take on the risk of adding them as an authorized user, there are alternatives to consider:
- Secured credit card: Designed for individuals with limited or poor credit history, secured credit cards require a security deposit and typically report to the major credit bureaus.
- Student credit card: If the person looking to improve their credit is a student, a student credit card could be a viable option. These cards are designed for students with little or no credit history and often offer rewards and incentives.
- Joint account holder: Adding someone as a joint account holder means sharing the credit card’s credit limit and legal responsibility for paying the bill. However, it’s important to note that not all banks offer joint credit card accounts.
Adding someone as an authorized user can be a helpful way to build credit or assist a friend or family member in maintaining an active card. However, it’s essential to weigh the pros and cons and consider alternative options to ensure the best financial outcome for everyone involved.
FAQs
Q: Can I remove an authorized user from my credit card account?
A: Yes, as the primary cardholder, you have the authority to remove an authorized user from your credit card account at any time.
Q: Do all credit card companies report authorized users to the credit bureaus?
A: No, not all credit card companies report authorized users to the credit bureaus. It’s important to check with the card issuer to confirm their policy.
Q: Will becoming an authorized user affect my credit score?
A: Becoming an authorized user can potentially have a positive or negative impact on your credit score, depending on the primary cardholder’s credit habits. It’s essential to monitor your credit report regularly to ensure accuracy.
Conclusion
Becoming an authorized user on a credit card can be a helpful strategy to build credit or assist a friend or family member. However, it’s crucial to understand the potential risks and benefits associated with being an authorized user. Moreover, exploring alternative options, such as secured credit cards or joint account holders, can provide additional solutions for establishing or improving credit. Make sure to weigh the pros and cons, communicate openly with the primary cardholder, and choose the option that best suits your needs and financial goals.