If you're thinking of signing up for an Authorized account, you might be wondering about the benefits these accounts could have on your credit score. Authorized users can not be held legally responsible for the balance in the account that they have been authorized to access. They also don't need to make monthly payments. However, by using a credit card for purchases, they can build up their credit history.
Authorized users can make their own purchases
It is a smart move to add your child or teen as an authorized credit card user when they are old enough. This is a great way for them to learn about personal finance, borrowing responsibly, and how to manage their debt. These lessons are very important for college students. Though it may seem smart to add a student in your account, it can also be confusing.
Adding an authorized user can have a large impact on your credit score. This is because credit usage is a significant factor in determining how high your credit score is. You'd use 30% of your credit limit if you had a credit limit $1,000 and made $300 per month. Your overall utilization will be reduced by adding an authorized user.
They're not legally liable for the balance
An authorized user of a card isn’t legally responsible for the card’s balance unless they make unauthorized purchase or charge an item to the account that the original cardholder wasn’t authorized. However, in some states, a spouse of an authorized user can be held liable for the debt if the cardholder dies. In community property states, the authorized user could also be a joint account owner and therefore equally responsible.
If the primary account holder isn't happy with an authorized user charging anything, they can have them removed. It's usually as easy as calling the number or submitting an internet request. Some card issuers will only allow the primary account holder or authorized users to be removed.
They don't have to make payments every month
Good news: Adding an authorized user to your credit account can help you build credit. Authorized users can benefit from the excellent payment history of the primary account holder. As long as the primary cardholder makes all of his or her payments on time, the authorized user should see a positive history on their credit report. However, not all credit card issuers report authorized user accounts to the credit bureaus.
A family member can be added to your credit cards. You can trust this person not to use the credit card for purchases that aren't necessary. The credit limit can be maintained so long as the card is used only for legitimate purchases.
They can establish credit history
Be careful when you're considering being an authorized user for someone else's credit cards. While this account may have some positives, it's still not a wise idea to use it in an impulsive manner. Using it responsibly can help your credit score.
Adding an authorized user to your credit card account can improve your credit score, which in turn will improve your access to products and lower rates. You can also have a negative impact on your credit score if late payments or missed payments are made. If this is the case, you might consider applying for a secured card.