The Pros and Cons of Adding a Family Member to Your Credit Card Account
Unlike a joint account, which is opened by two people at the same time, an authorized user can be added or removed at any time. In addition, an authorized user isn’t legally responsible for the bill.
November 23, 2021
In the sitcom world, adding someone as an authorized user on your credit card might go a little something like this:
Parents give their child a credit card, to be used “for emergencies only.”
Cut to the kid overspending on the latest tech from the mall, sports equipment, and a loud and flashy new wardrobe.
End with the parents, their jaws on the floor as they enter their kid's room, crammed wall to wall with new purchases.
But what’s the non-Hollywood reality?
Adding an authorized user to a credit card occurs often — between married couples, family members and even trusted friends. And while it can be a great way to help a loved one build credit, it also requires a lot of trust to be successful.
Here’s a look at what it means to be a credit card authorized user, why you might consider adding someone as an authorized user on your credit card and how to make the pros outweigh the cons.
What is an authorized user on a credit card?
An authorized user is someone who you, as the primary account holder, add to your account. After adding someone as an authorized user on your credit card, they’re able to use your account to make purchases, but can’t make changes to the account. Unlike a joint account, which is opened by two people at the same time, an authorized user can be added or removed at any time. In addition, an authorized user isn’t legally responsible for the bill.
When you add someone to your credit card, it allows them to gain access to your line of credit without going through a credit check. They receive their own cards in their own names, and are free to spend up to your account limit. Authorized users can also inherit your credit history, which can help them boost their own credit score.
The benefits of adding an authorized user to a credit card
One of the most common reasons people add authorized users to their credit cards is to help someone build or repair their credit. It works by adding your credit reports to theirs, which means that they can reap the benefits of your good credit history.
A fairly recent study found that adults in their 20s who were added to someone else’s credit card were twice as likely to have a credit score above 680. It usually takes several months to start seeing positive changes when building credit from scratch in this way.
In addition to helping an adult repair their credit, adding a child as an authorized user can help them start to build credit history — for credit scores, longer credit history means better. Many card issuers don’t have age limits on authorized users (although some set the minimum age at 13), which can be especially beneficial for young adults between the ages of 18 and 21 who can’t be approved for a credit card without a cosigner or solid proof of income.
If you just opened a new card that has a giant sign-up bonus for spending a certain amount, adding an authorized user can help you earn that reward. Having two people spending can also help you accumulate rewards points more quickly, and some cards even offer perks specifically for adding authorized users to your account.
Authorized users can earn their own rewards in some cases too, especially on travel. Some credit cards even offer perks and points for authorized users, like TSA/Pre-Check refunds, hotel, and car rental elite status, and even airport club lounges.
The risks of adding an authorized user to a credit card
If you decide to add someone else to your credit card, understand that it comes with some level of risk for you. There aren’t many credit card authorized user requirements and while an authorized user has permission to use your card, they’re not on the hook for the payment. If you add a user who takes advantage of your trust and maxes out your spending limit, the repayment is on you — and late payments or missing payments can negatively affect your credit score.
Another risk that can come with adding someone to your credit card is an additional annual fee. While not all credit cards require them, some charge more than $100 per year to add additional users.
In romantic relationships, sharing a credit card can also lead to tension, especially if you don’t exactly see eye-to-eye on spending. If both parties have access to the account statements, it can get messy. Not only when divvying up the bill, but when wondering why things were purchased (there’s a reason why money-related issues are so often listed as one of the top causes of marital strife).
How to add an authorized user successfully
The process of adding an authorized user is generally pretty simple and can be done either online or with a quick call. You’ll need the user’s personal information — like their name, address, phone number, and sometimes social security number, but typically no credit check is required.
That said, no two credit cards are alike. If you hold more than one credit card, it can be a good idea to do your homework and see which one offers the best deal for adding users.
Here are some questions you can ask yourself:
What will the authorized user’s credit limit be? American Express, for example, lets you set separate credit limits for each user.
Does the card report authorized user information to the three major credit-reporting bureaus? Not all cards do, and adding someone to help build their credit won’t work without your added information.
Is your credit card tied to a loyalty program? All things equal, the ability to earn a certain number of miles per transaction could be a tie-breaker when deciding which card to choose.
To protect yourself as the liable party, it’s important to set ground rules with your authorized user from the outset. If your user is your teenager, for example, do they get to have their own card, or do you keep it? If your goal is specifically to build credit history, you might consider the latter.
In addition, decide upfront who is going to pay, how payments will be handled and how extra costs like interest charges and annual fees will be dealt with. Be clear about who will get to use any card benefits, like rewards or cash-back bonuses, and any expectations or consequences you have regarding spending limits or paying down the balance.
If you decide that adding an authorized user to a credit card is the right choice for you, Tally† can help you keep track of spending on the card and simplify the process of paying down the balance. You’ll have easy access to your credit score and, if you qualify, it can potentially lower your interest rate — that’s good news for you and your additional user.
†To get the benefits of a Tally line of credit, you must qualify for and accept a Tally line of credit. The APR (which is the same as your interest rate) will be between 7.90% and 29.99% per year and will be based on your credit history. The APR will vary with the market based on the Prime Rate. Annual fees range from $0 - $300.