How familiar are you with the term authorized user on credit cards? After a number of conversations about this topic, decided It was time to Blog about this important topic. Want to make sure you’re all in the know!
When my dad was diagnosed with Alzheimer’s it was time for my mom to have her own credit card. Yes, she had a credit card that was under my dad’s name as an authorized user, yet that would stop upon Dad’s death. Another example is parents who have added their kids as authorized users to their credit cards.
These two examples represent two authorized user situations. There are many more, including business credit cards! It’s important to know the basics to protect yourself and your loved ones.
Image by Republica from Pixabay
Who Can Be An Authorized User?
An authorized user has permission to make purchases on someone else’s credit card but is not liable for card payments. Commonly, authorized users on personal credit cards are family members or trusted friends. Legally, authorized user status has no minimum age requirement but check with your card issuer to understand their policy.
Authorized users usually pay for their card purchases, and payment arrangements are made between cardholders and authorized users. The authorized user is considered a secondary cardholder with access to an account but no ownership.
Who Are Joint Account Holders?
While joint cardholders must apply for credit together and are both legally responsible for the bill, an authorized user has spending privileges on a card but is not liable for the balance.
Card issuers run credit checks on applicants for joint accounts, but they do not for authorized users. Generally, a primary cardholder only needs to reach out to the issuer by phone or online to add an authorized user to an account.
Joint cardholders share accountability for managing their card, even if one person pays the bills. One cardholder who misses a payment or runs up a balance can hurt the credit scores of both cardholders. Similarly, credit missteps by an authorized user or a primary cardholder can affect both people.
Removing someone from a joint account is not always easy. Per Bankrate, if you want to be removed from the account, you’ll have to call the credit card provider and be prepared to negotiate.
If the other account holder qualifies for the card on their own, the credit card company may approve your request. If not, your only option is to pay off any outstanding debt and close the account. You remain liable for any payments, and any activity will continue to be reflected on your credit reports.
Pros and Cons of Authorized Users
Pros:
- You can consolidate spending in the household.
- You can help the authorized user build credit.
- You can give someone with little to no credit access to a credit card.
- You can keep a rarely used account active.
- You can easily share an account with a family member or an employee.
- You could earn more rewards on purchases made by authorized users.
Cons:
- The primary cardholder is solely liable for payments.
- The card issuer may charge an annual fee to add an authorized user.
- The credit scores of both the authorized user and primary cardholder can suffer when either person mismanages the account.
- If the primary account holder dies, the card must be closed. The authorized user should not use this card. Two issues to consider: Does the authorized user have their own credit and credit card? Autopay purchases and or bills using this card must find an alternate form of payment.
Image by Mediamodifier from Pixabay
How to Remove an Authorized User
Each card issuer typically has its own process for removing an authorized user. Suggested to contact the customer service number on the back of your credit card to request removal of the user. Check when this removal is effective. It’s wise to keep a record of who you talked to and the time and date of the call.
The process is similar if you wish to remove yourself as an authorized user. The card issuer may require verification from the primary account holder before the changes take effect. Check with the card issuer for their details.
What Happens to Credit Card Rewards?
This is a biggie! The funny (strange) thing about credit card rewards is that brand loyalty airline and hotel points earned through a credit card aren’t held by the bank. Contact the specific brand program to ask about the redemption of their loyalty rewards.
Other Thoughts
The details in life can be overwhelming. An authorized user is one of the many things that may impact you down the line. My aim is to inform you and encourage you to make life easy on you while you’re living and maintain life as best as possible when things change.
The 12-module online course I developed walks through lots of these little things that trip us up. Self-paced and designed for you to go through one module per week.
Think of it as accountability along the way! So much can be accomplished by the end of Q1 2024 😉If you know of anyone who might benefit from this program, please pass along the information found here: Put Your Mind At Ease
If you have any questions or wish to discuss other ways to work with me, send me an Email or check out the website @ The Living Planner. Confucius said, “A man who does not think and plan long ahead will find trouble right at his door. Let’s think and plan ahead together ❣️Lynn
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