Credit Cards

How Does Authorized User Work

By David Krug David Krug is the CEO & President of Bankovia. He's a lifelong expat who has lived in the Philippines, Mexico, Thailand, and Colombia. When he's not reading about cryptocurrencies, he's researching the latest personal finance software. 8 minute read

Having impeccable credit is not a given. Constructing a lengthy credit history and a high credit score necessary to be approved for premium cash-back and travel credit cards takes a considerable amount of time.

If you’re eager to experience what it’s like to be a high-spending cardholder, you may skip the waiting and apply for a card as an authorized user on someone else’s account. But before you rush to persuade a creditworthy friend or relative to add you as an authorized user, you should weigh the benefits and drawbacks of this status.

Why Do Users Need to Be Authorized?

Although the procedures for adding authorized users to a primary cardholder’s account differ by the card issuer and kind of account, the vast majority of credit card issuers do permit such additions. However, some premium cards, especially those with significant primary user yearly costs, do impose annual premiums for each new user.

You can tag along on the primary cardholder’s credit adventure as an authorized user, but it won’t be without cost to you. First and foremost, you must exercise fiscal restraint or risk having your secondary cardholder status revoked at any moment by the principal cardholder.

In addition, you must always keep in mind that you do not have complete power over your future. Your credit history can be established or reestablished after bankruptcy, and your credit score may increase gradually if you use an authorized user account responsibly. 

However, if the major user falls behind on payments, you may anticipate more of the opposite.

Having an authorized user on a card can help both the primary cardholder and the authorized user in a number of ways, including maintaining account activity for infrequently used cards and allowing minors to establish credit histories. However, there are also significant dangers involved.

Advantages of Being an Authorized User

A higher credit score is possible after being an authorized user if you use the card responsibly and make your payments on time. The primary cardholder may benefit from adding an authorized user by maximizing reward points and decreasing credit consumption.

  1. Credit is established for the Authorized User. The most persuasive argument in favor of authorized user status comes from its ability to help those with little to no credit history, such as students and young adults, establish credit. If the issuer reports the approved user account to the consumer credit reporting bureaus, the user’s credit history will improve, which is a necessary condition for applying for future loans.
  2. Could Raise the Creditworthiness of the Authorized User. In the long run, the authorized user’s credit score can improve through on-time payments and appropriate use (low credit utilization). Repairing damaged credit is a slow and steady process, but every little bit helps.
  3. Preserves Data in Accounts That Are Rarely Used. The primary cardholder can secure the account’s continued existence by adding an authorized user. Maintaining a low credit use rate and increasing the average account age are both benefits of maintaining older, active credit card accounts in the name of the principal account holder. In the absence of negative variables like delinquencies, both contribute to a gradual increase in credit scores.
  4. Contributes to Higher Rewards. When it comes to earning credit card points, two people are better than one.

The Drawbacks of Authorized User Status

The credit of both the primary cardholder and the authorized user is vulnerable when in the authorized user state. The users’ personal relationships may also suffer if their communication breaks down.

  1. Possibilities of Harm to the Credit of the Authorized User. Authorized users’ credit may be negatively impacted if the principal cardholder fails to pay bills on time or keeps credit use low.
  2. This Has the Potential to Strain the Primary User’s relationship with the authorized user. The relationship between the cardholders and the authorized user is likely to deteriorate if the authorized user incurs more costs than the cardholders are able to repay on time. Do not put a close connection at risk if you are unsure of your ability to fulfill the responsibilities of an authorized user.
  3. Card Loss/Theft Is a Greater Concern. When a duplicate credit card exists, there is an increased risk that the original will be misplaced or stolen. In the event of loss, the principal cardholder will need to cancel and reissue any approved user cards that have the same number and security code.

Your Obligations & Rights as an Authorized User

Your rights and duties as an authorized user will be different from those of the primary account holder. A weak argument might be made that an authorized user account is not yours because of your subordinate status and limited access privileges. The onus is still on you to fulfill your half of the contract.

What a Licensed User Can & Should Do

To fulfill your obligations as an authorized user, you must safeguard your card and make only appropriate purchases. 

You can and should take these actions right now:

  • Accumulate Points for Card Purchases. Authorized users can earn rewards at the same rate as the primary cardholder for any purchases made with the card. If you don’t already live with your primary, it doesn’t harm to inquire if they want to split the profits.
  • Benefit from the Card’s Features. The benefits and access granted by an authorized user card are equivalent to those granted to the principal cardholder. One of the best features of the Chase Sapphire Reserve Card is that the principal cardholder and other authorized users can also enjoy airport lounge access. Credits for travel expenses, such as the $200 yearly airline charge credit offered by The Platinum Card from American Express, are the only exception to this rule and are provided on a per-card basis only.
  • Make Sure Your Card and Its Number Remain Safe. To use the card is an obligation, not a privilege. Be sure to safeguard your authorized user card and its associated number just as you would your own credit card. Forgetful authorized users with cards that share a number with the primary card will cause the primary cardholder to have to freeze the account and reissue a new card, which can be a major hassle if the prime cardholder is traveling.
  • Spending Too Much Should be Avoided at all Costs. Though you won’t have to pay back any of the money you charge as an authorized user, your spending beyond your means could put the principal cardholder in a bind when it comes to making their payments on time. As a result, that can have a negative impact on your credit score.

What Authorized Users Are Not Allowed To Do

You are not permitted to make any modifications to the primary cardholder’s account or payment settings simply because you are an authorized user. Unless the primary cancels your capacity to make charges, you can use the account as though you were the primary, but you are not legally liable for any of the charges made.

As a trusted user, you are restricted from these actions:

  • Update the Primary Cardholder’s Details. No matter how much pressure you put on the primary cardholder to provide you access to their account management portal, it’s quite unlikely that they will grant you access to make any changes without their approval. Even if the primary account holder doesn’t trust you, they might still give you the password if you ask for it.
  • Finish Up Your Account! You have no right to terminate the whole card account.
  • Cash in Your Rewards. Rewards can be accumulated in the account but cannot be redeemed at this time. For the primary’s sake, of course, but they should be pleased to share.
  • Send Money Directly to Credit/Debit Card Accounts. It is not possible to make a direct payment against a credit card amount unless you have access to the account. However, you are free to reimburse the principal cardholder for your purchases if you so want.
  • Pay Attention to Your Card Balances. Authorized users are not liable for any remaining balances on their cards. If the primary cardholder is reliable about making payments on time, this is a positive development that allows you to reap the benefits of using credit without taking on any additional risk.
  • Delete any references to the Primary Cardholder’s Account Transactions. However, you cannot dispute charges made by the principal cardholder. The two of you share the same destiny. Your credit score could take a hit if you go on an unsustainable shopping binge.

Things You May Want to Do as a Licensed User

Despite the fact that being an authorized user doesn’t require any of the following actions on your part, taking one or more of them could be to your advantage.

  • Get the Issuer to report your Authorized User Account to the Credit Reporting Agencies. Although it is safe to assume that your credit card issuer will disclose approved user accounts to consumer credit bureaus, you should still verify this with your issuer. Lacking this reporting makes your authorized user account ineffective for establishing or maintaining good credit.
  • Assist the Main One with Punctual Payments. However, there is nothing stopping you from aiding the primary cardholder if they are having trouble making a payment on time, even if they are ultimately responsible for any charges that accrue on the card. The short-term harm to your bottom line is preferable to the long-term damage to your credit score that would result from going delinquent.
  • Limit your time and money! To maintain the account’s credit utilization below 40%, you and the principal cardholder could agree to ad hoc use and spending limits. When you use more of your available credit, it can lower both your score and your primary’s.
  • Try Your Hand at Obtaining a Beginner Credit Card. Take advantage of the increase in your available credit provided by your authorized user account and apply for your own credit cards, such as a low-limit secured credit card or a beginner card like the Petal Cash Back Visa Card. After all, you probably don’t want to retain the status of an approved user indefinitely.

Bottom Line

Authorized user status on a friend or family member’s credit card account is a great stepping stone in establishing your own credit history. Authorized user status can help you create your personal credit history and, assuming the primary cardholder pays payments on time, boost your credit score if you can control your own spending.

Just keep in mind that credit is a privilege and not a right and that you should always act responsibly.

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