DEFINITION

A person who has permission to use and/or carry another person’s credit card but isn’t legally responsible for paying the bill.

BREAKING DOWN ‘Credit Card Authorized User’

Generally speaking, an authorized user is a person (usually spouse, domestic partner and/or child(ren)) who is able to make purchases using a credit card without having financial responsibility for the card. Depending on the credit card issuer, an authorized user may have his or her own credit card to carry or simply be authorized to make purchases with the primary account holder’s card.

In most states, credit card issuers do not view an authorized user as the primary person responsible for the entire debt, even if the authorized user is the person who amassed all or most of the charges on the card. However, the credit card’s activity (payment history, credit limit, available balance, etc.) may affect an authorized user’s credit report and be factored into his or her credit score. If negative activity is weighing down an authorized user’s credit score, some credit bureaus such as Experian, may remove the delinquent information from an authorized user’s credit file (you may have to file a dispute to have this done).

Authorized users can also typically report lost or stolen cards, receive account information (credit limit, available balance, fees, etc.), make payments and initiate billing disputes. Cards generally do not allow authorized users to close an account, add another authorized user, change the address or PIN, or request a change to the credit limit or interest rate.

TCS Recommendations

We approve of clients becoming authorized users when it makes sense. Here are some examples:

  • Client needs to build the credit profile.
  • Client is falling short of a minimum credit score lending requirement and doesn’t have an optimum positive credit profile.
  • Client independent credit card limits are low and the new authorized user account has a higher limit for credit systems to reference.

Here are some scenarios where TCS advises clients’ against authorize user accounts:

  • The account has negative credit history (late payments).
  • The account holder is carrying a high balance and is unable to pay off.
  • The account holder has a personal finance situation that is trending down.
  • The account holder has a history of fraudulent transactions.

Authorized user accounts can help build a credit profile but don’t expect your credit scores to go very high. You’ll likely get a boost but independent credit profile strength is far more important. Our credit report experience tells us adding many authorized user accounts in order to manipulate the system doesn’t work either.

Credit is all about balance, management, and reducing risk.

Credit Card Authorized User: Risk

Primary account holder risk: The main risk in providing a favor to a friend or family member by adding them to your account as an authorized user is that the user receives the card in the mail, and then uses the card to rack up debt they cannot pay back. Also, never add an authorized user then place all responsibility on them to manage the account and the payment schedule.

Authorized user risk: The main risk for the authorized user is the account holder misses payments on the account resulting in a credit scoring penalty for both the account holder and the authorized user. Another risk is the account holder carries a maxed out balance and cannot reduce the amount owed or pay off the account. In these scenarios authorized users should remove themselves as authorized users so their credit scores are not negatively impacted and credit reference systems cannot identify the negative account data.

Identifying credit account responsibility (liability) within credit reports:

I = Independent
J = Joint
B = Borrower
C = Co-Borrower
A = Authorised User

If you have more questions about Credit Card Authorized User Accounts feel free to give us a call or submit your information by clicking the button below.

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