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

• The card issuer reports authorized users

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. You should understand what those are before you decide whether being an authorized user would be good for you. 

What is an authorized user?

An authorized user is somebody who has 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 make transactions.

The primary card holder 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 an additional 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 start using 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 to build a credit history. 

However, there is a crucial difference between an authorized user and a joint account holder. This involves responsibility for the account’s debt. 

A joint account holder is equally responsible for paying the debt. This is not generally the case with an authorized user. 

An authorized user isn’t usually responsible for debt

• One exception is based on a marital relationship with the primary account holder.

• The other involves the impact of the account on the authorized user’s credit record.

You should fully understand these exceptions before you become an authorized user on someone’s credit card account.

When Might an Authorized User Be Responsible for Debt?

Normally, the primary account holder is solely responsible for the account. There are circumstances, however, where an authorized user may be responsible for the credit card debt. 

Who has responsibility for paying credit card debt

An authorized user may share some legal responsibility for the debt if they are married to the primary account holder and they 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 any credit card debt your spouse runs up while you are married. This is true whether or not you are an authorized user on the account. Being an authorized user does not reduce this responsibility.

The nine community property states are:

• Arizona

• California

• Idaho

• Louisiana

• Nevada

• New Mexico

• Texas

• Washington

• Wyoming

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 death?

If you are an authorized user, you should stop using a credit card immediately after the primary account holder passes away. 

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

• If you are 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 deceased’s outstanding credit card debt. This would be the case whether or not you were an authorized user on their credit card accounts.

Pros and Cons of an Authorized User

Benefits of Adding Authorized Users

Helps build credit history

Being added as an authorized user on an account can 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 build it up. 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 keeps the balance paid off and never pays late, so John gets a boost to his credit score even if he doesn’t use the account at all.

Provides convenience

Now let’s say that John is a responsible kid and he’s off to college soon. Sally wants to cover the cost of groceries, 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. 

Earn rewards faster

The more people who use the same card, the faster they can earn points, cash back, or reward miles. 

Get easy access to a credit card

An authorized user can begin using the credit card right away, without having to qualify for a new account. 

Risks of Adding Authorized Users

Financial responsibility

The primary cardholder is responsible for any charges made by an authorized user. For example, 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 will be hurt. The same is true if the credit limit is maxed out. 

Relationship strain

Taking on an authorized user opens the door to disagreements over spending habits and whose responsibility it is to make payments. 

Account holder can remove you at any time

A primary cardholder has the right to remove an authorized user at any time, which not only leaves the authorized user without access to the account, but can also strain a relationship. 

There may be an extra fee for it

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

How does being an authorized user affect your credit?

Another potential benefit that comes along with the right to use an account is that it may now be included on your credit report. This can be a good way to get started building credit.

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

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 to be added to a card that will be reported to the credit bureaus (call the issuer to ask). 

Your credit score will suffer if payments are missed or the balance on the card is high. So only become an authorized user with someone who handles the account responsibly.

Late payments - an authorized user should protect their credit

Often, the idea behind becoming an authorized user is to build credit. This can backfire if the primary card holder doesn’t use the account responsibly. 

So, for example, you might want to avoid becoming an authorized user on the account of someone who tends to make late payments. Also, even if someone makes the required minimum payment, carrying a high balance can also hurt both people’s credit. 

Becoming an authorized user on a credit card is an important decision for both parties. The primary account holder and authorized user should have a frank conversation first about how the account will be used. Once a person is made an authorized user, they and the primary card holder should then review the account together from time to time.