Most credit cards allow the primary cardholder to add another person, like a friend or family member, to their account as an authorized user. Authorized users don’t have to submit a credit application themselves, but once added they can legally make purchases on the card.
Adding an authorized user can enable them to make purchases and even build a credit history, but you need to know there are some risks. Here’s what happens when you add an authorized user to your credit card.
How to Add an Authorized User to Your Card
To add an authorized user to your account, you need to call your credit card issuer or log in to your online account. You have to supply personally identifiable information about the authorized user including their name, address, birth date and Social Security number (in most cases, an authorized user must be at least 16 years of age).
When your request is approved and processed, the authorized user receives a credit card with their name on it to use for purchases. Any purchases the user makes on the card shows up in your account and on your monthly credit card statement.
Your credit limit does not increase by adding an authorized user – it is split between all users on the card.
What Happens to the User’s and the Cardholder’s Credit?
Authorized Users
If you are adding the authorized user to help them build credit history, call the credit card issuer first to make sure they report authorized user accounts to the credit bureaus. If they do, that means the credit card account shows up on the authorized user’s credit report and impact their credit score.
If you use your card responsibly by maintaining a low balance and making all your payments on time, adding an authorized user is a good way to help them establish credit. The account can appear on their credit report in good standing and positively impact their credit score.
But if you have trouble managing your credit card, adding an authorized user to your account may not help their credit at all. Late payments, maxed out credit cards and accounts in collections can also be reflected on the authorized user’s credit report and can severely damage their credit.
Primary Cardholders
The authorized user’s credit history does not impact the primary cardholder’s credit in any way. The act of adding an authorized user also won’t affect your credit and the authorized user’s name won’t show up on your credit report.
However, all activity on your credit card can continue to affect your credit, including any purchases that the authorized user makes.
Who Is Responsible for Card Activity?
Authorized users can’t perform actions like adding new users, changing the address, requesting credit limit increases or closing the account. But the authorized user is allowed to make purchases on the account, and those purchases are ultimately your responsibility.
It’s still up to you to make sure your card payments are made on time. If you want the authorized user to be responsible for payments, you need to arrange that with the user. For example, they can pay you directly for purchases made on the card or you can give them access to the account to make payments themselves.
But, legally, the authorized user is not responsible for the card. If the authorized user racks up a huge balance, your credit can take a hit. If you were counting on them to make a payment and they miss it, you can be responsible for any fees and late payments can appear on your credit report. All credit card debt is your responsibility in the eyes of the law.
You need to absolutely trust any authorized user you add to your card and establish ground rules for how the card is used. Continue to monitor your credit statements after the fact; if the user can’t handle the responsibility, you probably need to remove their name from your account or take the card away.
