Most credit cards come with more perks and features than you might realize, such as travel benefits like roadside assistance and free credit scores printed on your monthly statements. One feature many people might not take notice of or understand is the ability to add authorized users to their account. This is an option that is worth exploring, especially if you have children under 18, young adult children or a spouse who you’d like to provide access to your credit card account. To help you understand authorized users, here are three key things to know. Before we dig into the details we want to make sure you’re that we’re talking about authorized users on consumer credit cards. While business credit cards also allow authorized users, some of the information in this post may not translate to a business credit card.
Authorized users don’t have the same responsibility as a primary or joint user
Although some people might use joint user and authorized user interchangeably, they are two totally different things. Joint users have equal responsibility of a credit card account, which means they can make changes to the account (such as requesting credit line increases or decreases) and are also responsible for paying the bill, while an authorized user cannot make account changes and carries zero responsibility in the event something should happen to the account. Typically, adding authorized users to a credit card account doesn’t cost anything. Each authorized user will receive a credit card with their name on it which lets them use the primary account owner’s account and credit line (though it’s important to note that you can add authorized users without getting them their own card if you just want them to be able to use yours when necessary). Most credit card issuers or banks do limit the number of authorized users a credit card account can have — for example, Discover credit cards can have a maximum of five authorized users.
Being an authorized user may or may not affect your credit
It may surprise you to learn that being an authorized user can have sometimes an impact on your credit. Often the payment activity on the credit card account will also be reported to the credit bureaus on behalf of the authorized user(s) as well. That said, it should be noted that not all credit card issuers report account activity to an authorized user’s credit reports — it depends on the bank, so it’s not something you’ll want to assume is the standard. Though an authorized user account on your credit reports is not going to make as much of an impact as being a credit card’s primary owner, if you’re someone with no credit or poor credit who has trouble getting a credit card, any little effort to help build or rebuild your credit is worthwhile — and this could be an ideal setup for couples with disparate credit who want to both use the same credit card account. Something to also keep in mind is that you’re essentially accepting the primary account holder’s credit habits as your own when you opt for a card that reports activity to the authorized user’s credit reports. This means if the person is not responsible with the card, it could end up impacting your credit as well. If you’d prefer something that offers a more direct approach to rebuild your credit, you might consider a secured credit card, which looks and acts like a regular credit card but is secured by a deposit you make when you open the account.
Adding a child as an authorized user can be a financial teaching tool
Rather than simply handing your child cash to use when they go out with their friends or travel by themselves, giving them a credit card can be a good way to teach concrete lessons about financial health. Any transaction your child makes with the credit card can be tracked through the monthly billing statement (and card’s online account), enabling you to sit down together and discuss spending and budgeting, as well as topics like APR and fees. This may not be a good option for youngsters with poor impulse control, however, so keep that in mind before giving them free range with your credit line. A better option for kids who need more limitations when it comes to spending might be a prepaid card with a set amount of money loaded onto it. Also, remember that you can add authorized users to your account without having a card issued to them, which might be a good choice for parents who merely want their children to be able to use their credit card every once in a while.
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