Is An Authorized User Responsible For Debt?

Becoming an authorized user on a credit card can be a good way to build or repair credit if two conditions are met: 

• The primary account holder has good credit habits

• The card issuer includes authorized users in its credit reporting.

If those are both a “yes,” being authorized as a user on someone else’s account can give you access to credit when you might not qualify for an account. It can also help you build your credit history. This can be a pathway to eventually having credit accounts of your own. 

Like any financial decision, becoming an authorized user has responsibilities and potential drawbacks. It’s good to understand what those are before you decide whether being an authorized user would be right for you. 

What is an Authorized User?

An authorized user is somebody who’s been given permission to use another person’s credit card. The primary account holder has control over the credit card account, but an authorized user is allowed to use the card.

The primary user can add an authorized user by contacting the credit card issuer. It may be possible to do this online. 

Credit card companies create their own rules about authorized users. Some charge a fee for having an authorized user on the account. Some allow you to set a spending limit for the authorized user. 

Once you are an authorized user on an account, you can use the credit card as if it were your own. The primary account holder remains responsible for making the monthly payments on the card balance. You should work out a private arrangement with the primary cardholder for how to cover your charges.

Is an Authorized User Different from a Joint Account Holder?

Yes, there is a difference between being an authorized user and a joint account holder. A joint account holder typically has more responsibility than an authorized user.

Both authorized users and joint account holders are allowed to use a credit card along with another person. In each case, the arrangement can be a way to piggyback on someone else’s good credit. That can help you get access to a credit card account you might not qualify for on your own. It can also help you build a credit history. 

However, there is a crucial difference between an authorized user and a joint account holder. A joint account holder is equally responsible for paying the debt. This is true no matter which account holder spent the money on the credit card. In contrast, authorized users are not generally responsible for making payments on the account.  

When Might an Authorized User Be Responsible for Debt?

While authorized users aren’t usually responsible for account payments, there are some situations where they might share some degree of responsibility:

• If the account has a poor payment record, it can reflect badly on the authorized user’s credit history, even though that user has no financial responsibility for making the payments.

• If the authorized user is married to the primary account holder, that relationship may create additional responsibilities in some situations.

How Being Married Affects Authorized User Status

Being married to a credit card account holder may create responsibilities that go beyond your status as an authorized user if you live in a “community property state.” A community property state is one that considers all property and debt acquired during a marriage to be shared equally by both spouses.

If you live in a community property state, you share responsibility, for the most part, for credit card debt your spouse runs up while you are married. This is true whether you're an authorized user on the account or not. Being an authorized user doesn't affect this responsibility one way or another.

The nine community property states are:

• Arizona

• California

• Idaho

• Louisiana

• Nevada

• New Mexico

• Texas

• Washington

• Wisconsin

In some of these states, registered domestic partners have the same responsibilities as spouses under community property laws. 

Are Authorized Users Responsible for Debt After the Cardholder’s Death?

If there is a balance owed on the account when the primary account holder dies, being an authorized user shouldn’t make you directly responsible for that debt. However, you could be indirectly affected by an outstanding balance in a couple of situations:

• If you're married to the account holder. If you live in a community property state, you may be responsible for your spouse’s debts after they die if they were incurred during your marriage. This could apply to any credit card account, whether or not you were an authorized user. 

• If you are a beneficiary of the account holder’s estate. The estate may be required to pay any outstanding debts before distributing any remaining money to beneficiaries. In that case, you may see your inheritance reduced by the amount of the deceased’s outstanding credit card debt. This would be the case whether or not you were an authorized user on their credit card accounts.

If you're an authorized user and the primary account holder passes away, you should stop using the credit card immediately and notify the credit card company. 

Pros and Cons of an Authorized User

Here is an outline of the pros and cons of having an authorized user on a credit card account.

These pros and cons are explored in greater detail in the next two sections.

Benefits of Being an Authorized User

Having an authorized user on a credit card has certain benefits—especially for the authorized user. Here are some examples.

Helps build credit history

Being an authorized user could help a person with no credit or poor credit build their credit score. 

Let's say John has a poor credit score, but is taking steps to improve it. John’s mom Sally, who has good credit, adds John as an authorized user on her credit card account. The creditor reports the account's balance and payment history on both John’s and Sally’s credit reports. Sally pays the balance off consistently, and never pays late. This should help build John’s credit score even if he doesn’t use the account at all.

Provides convenience

Now let’s say that John is in college and Sally wants to cover some of his day-to-day expenses, so she adds John as an authorized user and gives him his own card. It has his name on it, but it’s still Sally’s account and her financial responsibility. John can use it, but he doesn’t get the bill. 

Builds rewards faster

By letting John use her credit card to cover expenses rather than just giving him cash, Sally gets rewards points for his expenditures.

Get easy access to a credit card

Making John an authorized user on Sally’s account gives him access to a credit card much more quickly than having him apply for his own card without a good credit record.

Accountability for the authorized user’s spending

By having John as an authorized user on her account, Sally can see his credit card charges on her statements. This allows her to give him guidance about how he’s using the card, which can be especially valuable to someone learning good credit habits.

Risks of Adding Authorized Users

While there are benefits to having an authorized user, there are also risks involved—especially for the primary cardholder.

Financial responsibility

The primary cardholder is responsible for any charges made by an authorized user. If John goes out and charges a hot tub, Sally would have to foot the bill, because she is the primary cardholder.   

Potential credit damage

If a late payment occurs, both the primary cardholder and authorized user's credit score could suffer. The same is true if the credit limit is maxed out, which can happen more easily if two people are using the card. 

Relationship strain

Taking on an authorized user opens the door to disagreements over spending habits and whose responsibility it is to pay for various purchases.

Account holder can remove the authorized user at any time

A primary cardholder has the right to remove an authorized user at any time. This means the authorized user does not have control over their own access to credit. It can also strain a relationship if the primary account holder removes the authorized user. 

There may be an extra fee

Whether a credit card issuer charges an extra annual fee for an authorized user varies by company. The annual fee may be less than the fee paid for the primary cardholder, but it’s still worth consideration.

How Being an Authorized User Affects Your Credit

A key benefit to being an authorized user is that the card’s activity may now be included on your credit report. This could be a good way to build credit.

The bad news is that being an authorized user could hurt your credit history if the account’s payment record isn’t good. 

Your credit score could suffer if payments are missed, or if the balance on the card is high. So only become an authorized user with someone you trust to handle the account well.

Credit card issuers report authorized user accounts differently, and sometimes not at all. If you want to benefit from the primary account holder’s good credit, make sure you’re added to a card that will be reported to the credit bureaus (call the issuer to ask). 

How Authorized Users Should Protect Their Credit from Late Payments

Since the account’s payment history affects the authorized user’s credit, it’s a smart idea to protect it. This starts with carefully choosing whose card you get added to. You should only become an authorized user if the cardholder is someone you trust to make payments on time and avoid running up debts they can’t pay off.

It also might help to get access to the account statements so you can keep track of payments and balances. That way, you can be sure the account’s activity reflects well on your credit record.

Regularly reviewing the account with the primary account holder can ensure that you’re both on the same page about how you’re using the account. It’s also a good opportunity to discuss credit habits so you can learn from the account holder’s experience. 

Alternatives to Being an Authorized User for Building Credit

Becoming an authorized user on someone else’s credit card account is a quick and easy way to get access to a credit card and build your own credit record. Here are some alternative ways of getting access to a credit card:

• Sign on as a joint account holder. This gives each account holder equal responsibility for payments. It may make sense if both account holders share household expenses anyway. 

• Open a secured credit card. These are available to people with more limited credit records because they require a deposit as collateral. It can be a way to get a credit card on your own, but it requires tying up some money for the deposit. 

• Use a student or other credit-builder credit card. Some credit cards are designed specifically for people with poor or limited credit records. However, they are likely to have lower credit limits than other credit cards. They also may be more expensive. 

Whether you become an authorized user or use some other method of building credit, enter into it with your eyes wide open. The better you understand what’s involved, the better chance you’ll have of building a successful credit history.