Personal Finance

Money at 30: The Pros and Cons of Adding an Authorized User

With the holiday shopping season approaching, I’ve been thinking a lot about credit cards lately. In addition to planning out some of our shopping itinerary and determining which card is best to use for each item, I actually decided to apply for another credit card recently as well. After doing so, I also had another important choice to make: should I add my wife as an authorized user or not?

For all the talk I hear about credit cards, the topic of authorized users is one that doesn’t seem to come up much. Perhaps that’s because, while beneficial in some cases, the practice contains risks for both primary cardholders and those the might choose to add. Let’s take a quick look at some of the pros and cons that come with adding authorized users to a credit card account.

For cardholders:

You’ll be responsible for their purchases

The biggest thing to know as a cardholder considering adding someone else as an authorized user is that you will be held accountable for any purchases they make. After all, that’s what the “authorized” in authorized user means; you’re giving them permission to buy things with your card. Because of this, you’ll want to ensure that the person you’re looking to add — be they a family member or friend — is trustworthy.

You may earn more rewards

On the flip side, any purchases your authorized user makes will likely be eligible for the rewards offered by your card. In some cases this could help you unlock even more rewards as some cards have perks that require a certain level of annual spending. So, assuming that you and your authorized user work out an agreement vis-à-vis (no pun intended…) they’re paying you back for their purchases and keeping your utilization below a certain threshold, this could actually be a win for you.

For users:

It could boost your credit 

As I can attest to first hand, there are some potential credit score benefits that come with being an authorized user. When my wife and I were first married, her adding me to the Visa she’d held for 11 years allowed me to inherit some of her high marks, including boosting my age of credit. Additionally, since her credit limit has grown over time and we don’t typically use more than 10% of her limit in any month, being on her card helps bring down my overall credit utilization as well. While I never did get to check what my credit was like before we were wed, I attribute a good amount of my good credit fortunes these days to her.

It could hurt your credit

Just as cardholders should know and trust the person they want to add as an authorized user, potential AUs should be aware of their primary cardholder’s financial habits. That’s because things like late payments won’t only display on their credit report but could also affect yours as well. Similarly, if the card in question is regularly being maxed out, this could serve to increase your total credit utilization and hurt your scores. I should also note that, while I trust my wife and had no worries about adding her to my card, part of my hesitation was that her age of credit might take a slight hit by adding a new account soon after she opened another one of her own. As you can see, there’s a lot to consider when it comes to authorized userdom.

While there are some real benefits to adding an authorized user to your credit card or becoming an authorized user yourself, there are also some downsides. For cardholders, one risk is being stuck with a bill for things you didn’t buy yourself. Meanwhile users trying to piggyback on someone’s good credit might actually encounter the opposite result if things go bad. So, before you add or become an authorized user, be sure to not only weight these pros and cons but also come to an agreement with your other user about how you’ll handle the arrangement going forward.

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