Do’s and Don’ts When Adding Authorized Users to a Card

Author: Jonathan Fernandez, Assistant Vice President, Branch Manager 11/18/2021

Adding authorized users to your credit card is a thoughtful gesture. It’s become a common way to help, typically, a child, spouse, or other family member build credit. But while this can be helpful for the authorized user, it can also be risky for you as the account holder. To help you avoid any credit disasters, here’s a list of do’s and don’ts.

Do Add an Authorized User to Help Build Their Credit—But Choose Wisely

Your credit is your credit, so make sure you trust the person you’re adding as an authorized user. This is not an arrangement for a casual friend. Be smart about who you choose. It often makes the most sense to help your immediate family members build credit.

Making someone an authorized user allows the person to make purchases on your account, but that spending still falls back on your credit report. Make sure you choose someone who is going to act responsibly. All payments will be reported under the primary owner’s name, not the authorized user. Have a child heading off to college? This could be a good opportunity to help them build credit while keeping a close eye on their spending.

Make sure to choose one of your credit accounts that will provide maximum benefit toward credit building, preferably a long-standing account with a higher limit, low or no outstanding balance, and a solid payment history.

Don’t Expect Your Authorized User to Learn Everything About Managing Credit Cards Just by Adding Them

It’s smart to give your authorized user an early lesson in credit card use, but don’t expect them to become an expert overnight. Authorized users are not necessarily taking the full responsibility of making payments on time or spending wisely. They are not the primary owner of the card, so they don’t have as much to lose. They aren’t receiving a credit card statement, and they don’t have to pay the bills. Make sure to have larger discussions with your authorized user if you want them to learn more.

Do Establish Rules

We’ll say it again. This is your credit. Anything spent is being reported under your name. In the end, you could be paying even more in interest if your authorized user isn’t spending wisely. If you plan to give them a card to use, make sure you discuss approved expenses. What will they be allowed to charge? Are they responsible for paying you back? And if the rules aren’t followed, will they be removed from the account? Establishing rules from the get-go will prevent misunderstandings in the future.

Don’t Be Afraid to Remove Someone

You don’t want bad spending to affect your credit. So, if your authorized user is spending irresponsibly, you need to be prepared to remove them. As the account holder, you can call your credit card company to remove an authorized user at your discretion. Authorized users can also remove themselves.

Do Keep an Eye on Your Account and Set Up Alerts

Since you won’t be the only person on your account, it’s wise to set up alerts to see when money is spent and to set spending limits. Alerts will also give you a heads up if your card is being used illegally.

Don’t Forget About the Positive Impact This Could Have on Rewards, Perks, or Annual Fees

If you have a card that earns rewards, the more money you spend, the more rewards or perks you will receive. So, adding an authorized user can increase your spending and benefit you, too. Depending on the card, you may receive extended benefits. You may also be able to build rewards faster if someone else is also charging on your account.

Do Ensure That Your Credit Card Provider Reports Authorized User Activity

The main incentive to adding an authorized user to your account is to help them build credit and improve their credit score. Many card issuers report authorized user’s activity to the credit bureau, but some do not. The primary card user should confirm this by contacting the credit card provider to make sure the activity is reported so the authorized user can benefit from it.

If your authorized user spends wisely and acts responsibly, this can be a win-win—helping them establish credit for the future, while potentially benefitting you as well. To learn more about establishing credit and managing money, visit PlainsCapital’s Manage Your Own Money page.

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