Thinking Ahead: Adding an Authorized User to your Credit Card
As many of us know, it is possible to add an authorized user to our credit card accounts. Often, this may be a spouse, a teenage child or a family member that may otherwise not be able to obtain credit. Although this may be ideal in certain situations, it is definitely a decision about which you may want to think twice.
Any debt that is incurred on your credit card – regardless if it was charged by another individual – is your debt, and you, and only you, are responsible for it in the eyes of the credit card company.
There have been countless situations, for example, when an irate spouse, on the verge of a divorce, charges up credit cards on which he/she is only an authorized user. Or college-age children going off to school and irresponsibly and recklessly spending on their parents’ credit cards.
The bottom line is that adding an authorized credit card user to your credit card comes with its own set of risks. It is therefore of the utmost importance that you put a great deal of thought into this decision because, in the end, it is your credit and your finances on the line.
For example, I had a friend that agreed to add her brother as an authorized user to her credit card account because he had poor credit and was not able to get a card on his own. Although she made it very clear to him that he must pay the balance every month, the card’s balance quickly got out of hand and he was no longer able to afford the payments. Who was stuck with this debt? Yep, you guessed right: my friend.
After all, if she chose to not pay the credit card under the assumption that it was his debt, her credit score would certainly have taken a nose dive and the good credit she had worked for all of her life would have landed in the gutter.
It is important to understand that perhaps the very first mistake my friend made was allowing her brother to act as an authorized user. His bad credit should have been a red flag! After all, if was not able to maintain good credit on his own, what made her think that he would act any differently when it came to her good credit?
In the end, like anything else, the decision to place another individual on your credit card account is a very personal one, as each situation is truly unique. However, if you decide to put a loved one on as an authorized user, continue to closely monitor the account. If you notice any signs of abuse or if your loved one fails to pay the bill – even once – you can swiftly remove them as an authorized user.
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