If you or someone you know is just getting started out with credit, the credit limit provided by a card issuer may be limited. When you first open an account with a credit issuer, you will receive a set amount of credit based on your previous credit behaviors and FICO® score.
If you maintain consistent payments on your credit account, overtime your credit issuer will often raise your limit. You can also request an increase via a phone call to their customer service department. However, please keep in mind that requesting an increased limit will likely result in a hard inquiry on your credit report.
Another way for a person to increase their access to credit is to be added as an authorized user on another account. Keep in mind that there are some card providers that will charge for adding authorized users. Before adding someone as an authorized user, be sure to clarify any possible resulting fees with your individual credit institution.
How to Add an Authorized User to Your Account
Adding an authorized user to your account is a relatively quick and easy process. Some credit card companies allow you to add an authorized user during the initial account application. To add them, all you have to do is log into your online account and search for the link that has “authorized user” in its name.
Click on it and enter the basic information it asks for, e.g., full name, address, date of birth, social security number, relationship to the primary cardholder, and citizenship status. After entering the information, you will be prompted to submit your request. Usually you can get an application decision instantly. However, it could also take some time to verify your account, as well as the credit history of the additional card user. After this process is complete, your authorized user would be sent a new card; Once activated, they will have full privileges to make purchases like any other card.
Some banks will allow the primary account holder to set a spending limit on the authorized user’s account. This is a good idea if you are helping someone who is new to credit. By setting an initial limit you will be able to protect your account from excessive charges. This will also help your authorized user learn to manage credit responsibly.
It is important to note however, that an authorized user does not have any legal obligation for the purchases made on that account. They also would not have access to view your transactions, or make cahnges to the account. This would include things such as changing an address or adjusting the preset spending limit. If you add someone to your account, you will also be able to view their account history. This can come in handy in the case that you have any questions about specific purchases or card abuse.
Benefits of Adding an Authorized User
Boost Credit Score
Adding an authorized user to your account may help them improve their credit history, which will appear on the authorized user’s credit report. The issuers of the card report the card activity in the same manner as if the card was theirs along. By paying off their balances and maintain responsible use of the card, they will likely see an improvement in their score. Now what if you are the authorized user. It works the same. However, it is important that you are only added to an account that is currently in good standing, so that a prior negative history does not impact your current score.
In addition, adding an authorized user can help you lower your credit utilization ratio. An additional card can increase your average of accounts, which is beneficial when calculating your credit score. It will also slightly impact your credit history, as every new credit account you open, decreases the overall age of your accounts.
Account Management Privileges
An authorized user can perform certain actions that work to their benefit. Not only can they can make purchases and make payments from the credit card. An authorized user can also accept offers given by the card issuer. And if for some reason the user no longer wants to be on the account, they can also request to have their authorized user status terminated.
Authorized users earn all the rewards that a primary account user would. However, all the rewards will go to the account of the primary card holder. Because of this, you can designate multiple authorized users to your card and stock up all the rewards from their spending which is quite beneficial. Just be sure that you are adding someone that you trust and who you know will manage their card responsibly. Or someone who you think that you could help to get there.
While every card issuer will have their own terms. Authorized users will often remain eligible to use many of the purchase protection perks and convenience as dictated in the terms agreement. Sometimes there may be limits as to how long specific perks are available, or blackout dates for certain discounts only available to primary account holders. For example, reimbursements of a certain amount, price protection, warranties, travel accident insurance, reimbursement of trip cancelation, and the cover of rented vehicles against damage may have additional stipulations for authorized users. Check with your card issuer to find out which terms apply.
What to Keep in Mind
Authorized users have no legal responsibility towards the purchases on the primary account. You will remain the primary account holder. As such, you and you alone will be liable for any late payments or debts incurred by the authorized user. They can also end up exceeding the credit utilization ratio by pushing the limits of outstanding balances. They may (knowingly or unknowingly) take for granted the privilege of being added to your account. In order to avoid strained relationships and a day in court over owed payments, it is best to do the following: a) set a credit card limit for your authorized user if and when possible. And b) only add users to your account who you trust that they can use the card responsibly.
Do not be guilted by a friend, partner, or family member to be added as an authorized user. While you may truly believe out of the kindness of your heart that you are helping them, any poor choices they make with your card will come back to haunt you. Credit is an individual responsibility and if you find that your added authorized user is unable to manage the account appropriately, you should promptly remove them.
The purpose of adding or becoming an authorized user, is to learn how to manage credit responsibly. Authorized users should limit their card use to necessary purchases, keep the credit utilization low as possible, and make all payments on time. This way they will be able to gain experience using a credit card as intended, and graduate to using their own card on their own line of credit.
Have you ever added someone to your account? Did it help them? Would you do it again? Share your experiences down in the comments section below.