One little fact about credit card accounts that not everyone knows about is authorized users. An authorized user is someone you can add to your credit card account who will then be issued a card and be able to make purchases charged to your account. At first glance this doesn’t seem too exciting, but there are a lot of benefits to having an authorized user on your account that I will discuss in this post.
Build and Rebuild Credit Faster
Although a credit card company will generally not do a hard pull on an authorized user’s credit score, the account will appear on that person’s credit report. This is typically a good thing, especially for people who have a limited credit history or have a checkered credit history. By themselves they may have not been able to get a credit card, but as an authorized user they can start building a positive credit history with the help of the primary account holder. This is particular useful, for example, with college students who might not have a steady income to get their own credit card but can be added to their parents’ account in order to start building depth to their credit report. The positive effects might not be as strong as having their own account, but it will definitely have an impact as time goes on.
More Rewards Opportunities
By having one or more authorized users on your account, you generally will have more purchases put on that account which in turn should result in more rewards. If you have a credit card and your spouse or significant other only pays for things in cash, you are losing a lot of great cash back opportunities! By adding that person on your account, now they can start using their card for purchases which will earn you more rewards (instead of the 0% cash back by using only cash or debit). In addition, a few cards out there have sign-up bonuses for adding an authorized user to the account. It probably won’t be a huge amount of money but every little bonus is still nice.
Warnings and Things to Keep in Mind
Having an authorized user can come with a lot of risk and you need to fully trust the person you are adding to your account. Yes, they are able to help you increase your rewards and help their credit score, but you are still solely responsible for paying the bill and your credit score is on the line. If you cannot trust an authorized user to not run up your credit bill each month to the point where you can’t pay it off, do not add them. This is why I only recommend adding a spouse or a very trusted significant other (or that trusted son or daughter trying to build credit). Friends, distant relatives, and pretty much anyone who does not live at the same residence as you do are generally very risky candidates.
Sometimes it might be better for a person to actually get a new credit card account themselves instead of being added as an authorized user. Assuming that person has a high enough credit score, applying for their own account opens them up to sign-up bonuses and other perks that authorized users might not get with their new card. Don’t limit yourself or others if you can get more out of separate credit card accounts!
Overall, authorized users can be very useful options for families that might have a spouse who cannot get a card by themselves or want to try to build up their credit without opening their own account. It is also a good way to keep accounts consolidated between two people and maximize your reward potential. Just do your research and make sure you are not limiting yourself by missing “double dipping” opportunities in credit card sign-up bonuses and other incentives. Also only add people you can absolutely trust on your account because it will be your credit score that will suffer the most if the spending gets out of hand.