Pros and cons of being an authorized user on a credit card

Quick insights

• Becoming an authorized user can have numerous benefits, including building credit and gaining access to a credit card.
• Adding an authorized user can also benefit the primary cardholder by organizing expenses, maximizing rewards earnings and more.
• Potential drawbacks associated with authorized users include possible fees, unequal financial responsibility, credit score impact and more.

Authorized users: what they are and why it’s done

An authorized user is someone designated by the primary account holder to use their credit card account. They are issued a card in their name, which is connected to the account holder’s account.

The addition of an authorized user to an account may be done for two reasons:

• to help build the credit history and score of the authorized user
• to help organize expenses by having all charges (and all rewards) combined into one place.

Benefits of being an authorized user

There are numerous benefits to being or adding an authorized user:

• Build credit: One of the benefits of being an authorized user is the ability to build your own credit score, credit history and payment history with the help of the primary account holder.
• Track purchases: The ease of tracking purchases on a single monthly statement makes the authorized user option a popular choice.
• Easy credit card access: Being added as an authorized user can help people with limited or no credit history gain access to a credit card for which they may not have been approved otherwise.
• Help with card activity and benefits: An authorized user can help keep an infrequently used account active, and it may provide a boost to earning rewards and benefits included with the card.

Disadvantages of being an authorized user

Despite the many benefits listed above, being an authorized user comes with some inherent disadvantages as well.

• Financial responsibility: The primary cardholder bears full financial responsibility for all purchases made by the authorized user.
• Credit score: While the primary cardholder’s responsible use can improve the authorized user’s credit score, their irresponsible use can similarly hurt it.
• Limited access: Authorized users can be removed at any time, and they cannot use all of the benefits of the card. For instance, they cannot earn their own credit card rewards points and typically are not authorized to redeem them.
• Fees: Some credit cards may charge a fee for adding an authorized user.
• Potential conflicts: Shared financial responsibility can cause conflicts among partners and family members, especially in the context of missed payments and other poor credit behavior.

When it might be a good idea to add an authorized user

So, is the addition of an authorized user a good fit for you? The primary account holder might benefit from adding an authorized user in the following situations:

• You want to consolidate expenses into a single account.
• You want to introduce your child to credit and teach them sound financial habits around spending and on-time payments.
• You want to be able to keep track of your child’s expenses, often on their first credit card.
• You want to accelerate and maximize the earning of rewards points.

Alternatives to adding/being an authorized user

If an authorized user isn’t the best option for your situation, you might want to consider either of the following alternatives:

• Starter cards: You might prefer to open a first credit card account rather than adding/becoming an authorized user. There are pros and cons to both, but it could be helpful to read some tips for choosing your first credit card before making a decision.
• Co-signing loans: Co-signing a loan might be a better fit for your credit needs than a new credit card. Whether it’s a mortgage, auto loan, credit card or something else, a loan co-signer may be an option worth considering.

How your credit score may be impacted

Your credit score is made up of a number of weighted factors, including payment history, credit utilization, account history, and more. An authorized user can see their credit score improve after a history of on-time payments, credit utilization at or below 30%, etc. But both the authorized user and primary account holder could see their credit score go down if any of these factors become negative – such as missed payments or high credit utilization.

The bottom line

If you’re looking to build up your credit history or credit score, combine expenses into a single account and/or streamline rewards, an authorized user might be the best fit for you.