Plenty of ways are available to build or improve credit scores. Like you apply for a secured credit card and pay your balance in full every month. Or you can opt for alternatives like reporting your monthly payments like house rent or utility bill payments to the credit bureaus. Keeping the current accounts running and paying your debt as faster as possible also improves your credit history.
And becoming an authorized user on your friend’s or family member’s card is another popular way of building good credit.
What is a Credit Card Authorized User?
A credit card authorized user is an individual allowed by the cardholder to use the card for everyday payments and purchases. The person who owns the card is known as the primary cardholder.
For personal credit cards, an authorized user can be a family member like a child, a spouse, or a friend. Business credit cards can be used to add employees as an authorized users so they can easily pay for business expenses. The authorized user may be provided with a separate card by the company but the account is linked to the primary cardholder.
Understanding Credit Card Authorized User
An authorized user on a credit card is not responsible or liable for the payments made through the card. However, the primary cardholder expects that the authorized user will pay the cost of purchases or payments. This is basically an agreement between the cardholder and the authorized user to pay off the balance utilized. The primary cardholder is responsible for the balance payment and to cover any other charges on the card. This means, if the authorized user refuses to pay the balance, the primary cardholder will make the whole payment.
What Responsibilities does an Authorized User Have?
Authorized users are allowed to use the card for payments and purchases. But he/she cannot make any changes to the credit card account like applying for a credit limit increase, adding a new user or canceling a card, etc. They are also not required to pay the balance on the due date as it is the responsibility of the cardholder.
Is the Credit Activity of the Authorized user Reported to the Credit Bureaus?
The main benefit of becoming an authorized user is to enjoy the good credit and spending habits of the cardholder. This helps you improve your score. Some credit card companies offering the best credit cards may report the activities of authorized users to credit bureaus but some may not. The cardholder can ask the company if they report such information to the credit bureaus or not because most users are being added to avail the benefit of a good credit score of the primary cardholder.
How to Add Someone or Get Added as an Authorized User?
The primary cardholder has the authority to add or remove an authorized user on a credit card. If you want to add someone on your card, you can do it by contacting the credit card company or by using your credit card account. You can easily do it yourself by logging into your card account and submit the details of the authorized user you want to add.
If you want to get added as an authorized user, you should ask your friend or family member to add yourself to his/her credit card. Hence, you need to make sure that you will regularly pay the balance for payments or purchases made through that card. A primary cardholder may ask you to sign an agreement for this purpose.
Some credit card companies issue separate cards for authorized users and they are directly mailed to the cardholder. It is the consent of the primary cardholder whether to give the card to the user or not.
Benefits of Adding an Authorized User to your Card
Adding an authorized user to your credit card offers benefits like:
Helping a family member like a child, spouse or friend build credit
When you add your child, spouse or friend as an authorized user to your card, it helps them build good credit even without applying for a new card. They can reap the benefits of your credit history instead of getting a separate card.
Earning more rewards
You can earn more rewards and perks on your card even if you are not using it yourself. Whenever a user uses your card for personal payments or purchases, the free rewards and perks are added to your account that you can redeem yourself.
Keeping an unused credit card active
If there is an unused credit card, you can keep it active by adding a new user to it. The user will swipe your card for his/her payments and your account will remain active without having a bad impact on your credit history.
Spending Tracking
You can add your spouse or child to your credit card as an authorized user to keep track of their spending habits. This helps you keep a check on where they are using your card and how much they spend every month.
Drawbacks of an Authorized User to your Card
There are always some risks of adding a new user to your card like:
You are responsible for payments and charges
As a primary cardholder, you are solely responsible for paying off the balance and other charges made to the card. And if the user is unable or refuses to pay for his transactions, you will need to pay off the balance to avoid additional interest or any other charges.
Annual Fee
Some credit card companies charge their users annually when they add authorized users to their cards. They may also charge an additional fee if they issue a separate credit card for the authorized user.
The bottom line
Adding an authorized user to your card or becoming a user on someone else’s card offers a variety of perks and also comes with some risks as well. This is the reason, do your homework to understand the situation and make an informed decision by understanding facts. You should also contact the card issuer to learn more about authorized users before adding one to your card.
For more information and tips to help you choose the best credit card in NZ, visit our website Credit Cards Compare.
