Q: Is adding an authorized user to a credit card a good idea?
A: Thanks for your question Lynn. Most credit cards (almost all) will allow the account holder to add on authorized users. For those that choose to add a user, they usually add only one. However there are some credit cards that let you add multiple users if you so choose. But whether it’s one or five, is this a smart move? Let’s take a closer look…
Why Add An Authorized User?
Perhaps you are a parent who wants your son or daughter to have a card. Maybe you run a small business and would like one of your employees to have their own credit card for convenience. But most often, it seems to be that the new card is issued to their spouse – whether that be a husband or wife, boyfriend or girlfriend.
The Pros
- Adding a user is a convenient way to give someone access to your line of credit for purchases
- The places the authorized user spent money will be listed on your monthly statement
- It can be a way to help build credit for the authorized user, if their Social Security number is provided. In September 2007, FICO took away this “piggyback” privilege, but they reverted back in July 2008 and decided to count authorized users once again.
The Cons
- If there’s one piece of advice you get from this post, it is that adding an authorized user to a credit card is almost always a bad idea when it comes to boyfriends/girlfriends. I can’t even begin to tell you how many horror stories I’ve heard. They thought because they were together for years it would be okay to do. Lo and behold, the relationship would go sour and the authorized user would rake up excessive amounts in charges. Unfortunately, the main cardholder would have no recourse since the other person was authorized to do that. So essentially, you are handing someone a blank check when you do this.
- Parents like the idea that they can see where their kids are spending money, but the truth of the matter is that kids are crafty these days. They will buy a pack of smokes or bottle of booze at the grocery store so it looks like a food purchase. I’ve even heard of them going to a grocery or drugstore to buy a gift card (they usually offer them for dozens of different places). So the idea that the parent knows what their kid is buying is really an illusion.
- Authorized users also have a tendency to spend more than if they were responsible for the charges, since it’s OPM (other people’s money).
Conclusion
Just make sure you think long and hard before adding anauthorized user to a credit card. If you want your kid that’s 18 years or older to have the benefits of a credit card, but without the temptation to overspend, then you may want to consider the new AmEx Zync Card. It’s a charge card, so the balance cannot be carried from month to month. It’s also geared towards college students and people trying to establish their credit. Check out our to find out more.
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