When you fill out a credit card application, you are usually given an option to add an authorized user to your account. You may wonder if there are any benefits to adding a user to your credit card.
There are very few benefits for you, the primary cardholder, when adding an authorized user to your account. But adding a person as an authorized user can certainly benefit that person and possibly improve their credit profile.
Pros of Adding an Authorized User
No matter the person’s relationship to you, they will be able to use your credit card if you add them as an authorized user. For example, if you own a company, you can add employees as authorized users, or you can add family members or friends to your personal account.
Let’s say your spouse regularly does the grocery shopping. If your spouse is an authorized user, your spouse can use your credit card without any hassle at the register. Additionally, if the card is lost or stolen while in their possession, you will both be protected by your credit card’s fraud insurance.
However, if your spouse is not an authorized user, the cashier may not let the credit card be used for that transaction. Even more troubling, if the card is lost or stolen while in their possession, this may negate the fraud protection on your card since the credit card company could claim you did not take adequate precautions to protect your account. In this event, if a criminal party uses the stolen card to make purchases, you could be on the hook for paying off the balance that has accrued.
Another benefit to adding an authorized user to your account is helping them build or rebuild their credit. Let’s say someone in your family has a poor credit history for some reason. If that family member is added as an authorized user on your account, and you both use the card responsibly for a period of time, that family member’s credit score could eventually begin to climb.
Adding someone as an authorized user may help your score as well in some instances. If you have an account you rarely use, the card issuer might be tempted to close your account due to lack of use. However, if you add your son as an authorized user, for example, his activity on the card may prevent the company from closing the account.
Cons of Adding an Authorized User
There are two main drawbacks to adding someone as an authorized user. The first is you must share your credit limit with the other individual, which means you will have to coordinate purchases to make sure you both know how much credit is remaining on the card. You could have your credit card declined at the register because your authorized user made a large purchase without letting you know and this used up the majority of your credit limit.
The main disadvantage is that you, the primary account holder, are ultimately responsible for any charges made to the card. Thus, you must make sure your authorized user is a trustworthy individual. If you make your aunt an authorized user on your account, and she accrues a large balance on card that she can’t pay back, you will have to find the money to pay off the balance. Since she was an authorized user, you will not be able to protest the charges.