Credit Card Authorized User: Definition, Risks, Impact on Credit

What Is a Credit Card Authorized User?

An authorized user is someone who has official permission to use another person's credit card but isn't legally responsible for paying the bill. For personal cards, authorized users are often family members, such as a child or a spouse. Here is how it works, including some of the potential pitfalls.

How Being an Authorized User Works

Cardholders must apply to add an authorized user to their accounts. In general, anyone can be an authorized user, although some banks impose minimum age limits. Authorized users are not subject to credit checks, as primary cardholders are.

Some credit card issuers provide a unique card to authorized users that is linked to the primary account. Others simply allow an authorized user to make purchases with the primary account holder's card.

An authorized user is not liable for the payments that they charge to the credit card. Though the primary cardholder may expect the authorized user to cover the costs of anything they purchase, legally the responsibility lies with the primary cardholder.

For example, if one member of a couple is an authorized user on the other's credit card and they split up, the cardholder is legally responsible for covering any charges, regardless of who made them.

Authorized users sometimes opt to pay the cardholder whatever they owe on the card, so that the primary cardholder can pay the balance. Or, the primary cardholder may give them access to the card's online account so they can make the payments themselves. In some cases, such as when a child is an authorized user, the cardholder may simply pay the entire balance on their own.

Authorized users typically don't receive a monthly statement (or bill) for the credit card, but the statement may break out their charges separately.

In addition, authorized users have some limits on what they can do with the card. For example, issuers generally don't allow authorized users to add another authorized user, change the account address or PIN, request a change to the credit limit or interest rate, or close the account.

Generally speaking, primary cardholders can't impose spending limits on authorized users through the card issuer, although they can agree to limits among themselves. Some American Express cards are an exception to this rule, allowing primary cardholders to set a limit as low as $200 for their authorized users (American Express calls them additional card members).

How Being (or Having) an Authorized User Affects Your Credit Score

Many individuals become authorized users on other people's credit cards as a way to build or rebuild their credit. If someone has little or no credit history, often referred to as a "thin file," becoming an authorized user is one way to obtain access to a credit card and begin to establish a track record. Students and new graduates often find themselves in his situation.

Similarly, if someone has a low credit score that makes it difficult for them to be approved for a card on their own, becoming an authorized user can help them get their score back into an acceptable range so that they can.

If you're looking to become an authorized user for this purpose, note that unless the card issuer includes you in the information it supplies to the major credit bureaus, it will have no effect on your credit reports or credit scores. So it's worth asking beforehand.

On the downside, if either the authorized user or primary cardholder gets into trouble with the card—such as running up a huge amount of debt or bills they are unable to pay—that can drag both their scores down. So, just as primary cardholders need to be careful in taking on an authorized user, would-be authorized users need to be sure they aren't tying their financial fate to someone who's apt to make their credit even worse.

Authorized User vs. Joint Account

Adding an authorized user to a credit card isn't the only way that two people can share an account. Another is opening a joint account together.

The principal difference between these two arrangements is that with a joint account, both parties' credit scores will be considered when they apply and, if they're approved, they'll both be legally responsible for making payments.

Other Alternatives to Authorized User

People who are having difficulty getting a credit card on their own also have a couple of other alternatives:

Line up a co-signer. A co-signer is someone who adds their name to a credit card application and agrees to be legally responsible for the debts if the other person fails to pay them. Many card issuers today no longer accept co-signers, so it may be difficult to find one that does. However, co-signing remains common with other forms of credit, including mortgages and car loans.

Apply for a secured credit card. Secured credit cards are designed for people with poor credit or a limited credit history and work differently from traditional, unsecured cards. With a secured card, a person puts a sum of money into a bank account affiliated with the card issuer, which then serves as a sort of credit line on the card. The cardholder can use the card for transactions like any other card but can't exceed the money they have on deposit. After using their secured card for a period of time (and consistently paying their bills), cardholders can often graduate to a regular card. Secured cards are widely available from the major card issuers.

The Bottom Line

Becoming an authorized user, or adding one to your account, can have a number of benefits, such as making a credit card available to someone who might not otherwise qualify for one. However, primary cardholders should remember that they'll be stuck with the bill if the authorized user can't or won't pay what they owe.