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Credit Card with Authorized User

By becoming an authorized user, you can join another person’s credit card account and use it for purchases. Over and above the advantage of having access to more credit, if the primary cardholder has good credit it can help you build your creditworthiness.

What is an authorized user?

An authorized user is a person who the primary cardholder has added to their credit card account. Anyone who meets the age requirements can become an authorized user. No credit check is required.

It’s good to be aware that adding an authorized user could come with a fee. Cards with an annual fee may also have an authorized-user fee.

Responsibilities 

If you are the one who applies for the credit card and your name is on the agreement, you’re the primary cardholder.

As the primary cardholder, you:

  • can add and remove extra cardholders at any time
  • are liable for staying below your credit limit and keeping payments up to date

What are the benefits of being an authorized user?

Having only one account and one bill to manage, a shared card saves time. You may also save on fees because it’s usually cheaper to have another card than it is to have separate accounts. 

Adding an authorized user

Only the primary cardholder can add someone. You can do it online, over the phone, or through your bank’s mobile app. The process only takes a couple of minutes, and your new card is typically sent to the primary cardholder’s address. 

Removing an authorized user

Primary account owners can remove users at any time. It’s usually possible to do it online, but calling might be better if you have a hard time with the website or mobile app.

Best practices for having an authorized user

To avoid issues, it’s a good idea for account owners and authorized users to create a payment arrangement. For example, the authorized user sends the equivalent amount of their purchases to the owner at the end of each month. The account owner could also send a request for payment using a payment app. 

Tips for deciding whether to let someone be an authorized user

Make sure you choose someone you can communicate openly with. It is important to someone you trust when making financial ties.

What happens with credit for:

Authorizing a user on your account or becoming an authorized user may affect your credit report.

Primary cardholder

The authorized user’s credit score, credit report, debt, or payment history does not affect the account owner’s credit. The authorized user’s history doesn’t appear on the account owners at all. That being said, primary holders are responsible for any debt attached to their account. If they fall behind on payments, they could see a drop in their credit score.

Authorized user

Credit cards with authorized users do appear on an authorized user’s credit report. This is how being an authorized user can help you build your credit history. The account may also help your credit if the primary cardholder has a low credit utilization ratio, which will reflect in their history.

It isn’t just good credit behaviour that can show. If the account owner has a history of missing payments or other bad behaviour, you probably won’t benefit from being on the account. 

The account will only be on your credit report if the card issuer has reported the authorized user account to Equifax or TransUnion. If the issuer doesn’t report, then there will be no effect on your credit report. Make sure you talk to the card issuer to confirm they report authorized user accounts before becoming one.

Pros and cons of credit card authorized users 

There are pros and cons for both parties.

Primary Cardholder

Primary cardholders have a lot to consider before adding any authorized users to their account. 

Pros

  • More points – The more you use it, the more points you’ll earn
  • Money management – This allows for budgeting and analyzing spending patterns. This is especially true for parents who are teaching about credit and money management

Cons

  • Extra card fee – Ordering an extra card and adding a second user to the account usually involves a fee
  • Liability – The account owner is responsible for every dollar owed, regardless of who spent it

Authorized User 

Authorized users have less responsibility than the primary. They also have fewer long-term benefits. 

Pros

  • The ability to spend – Whether online shopping, renting a vehicle or a hotel room, being an authorized user lets you make these purchases
  • Learning experience – Being an authorized user is a great way to learn about finances, especially for younger or new credit users

Cons

  • Rewards – Can’t redeem points
  • Might not build credit – The most obvious drawback is that your use of the card may not add to your credit history

Cost of adding an Authorized User

Depending on the credit card with the authorized user account you’re added to, there may be a fee. Speak to the credit card issuer to find out if they have any added costs.

How does a joint account holder or cosigner differ?

Being an authorized user differs from being a joint account holder or cosigner.

Joint Account Holder

A joint account holder applies with someone else for the joint credit card. To qualify, both sides need to meet the requirements. Both co-applicants need a good credit score and must qualify for the account separately. As joint holders of the account, you both have access. Any transactions made by the other account holder also fall to you.

Co-signer

A cosigner is somebody who takes responsibility for another’s debt if the borrower can’t make payments. Although the cosigner does not have access to the account, they are responsible for any unpaid debts. It is common for a family member or guardian to act as a co-signer.

Conclusion

Getting added as an authorized user offers many advantages. It gives you access to a credit card if you are unable to access your own and can improve your credit score.

Struggling with credit card debt? Speak with one of our qualified counsellors today to come up with a plan for financial freedom.

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