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Did you know that adding an authorized user to your account is a great way to improve a friend or family member’s credit?
You can even add your child as an authorized user on your account — it’s a terrific way to help your son or daughter establish credit history. The good news is that authorized users can still earn a welcome bonus on the same card if they decide to apply for their own card in the future, so you don’t have to worry about restrictions from banks that issue the best travel credit cards, because their welcome bonus rules apply to the primary cardholder.
For example, American Express only provides you the opportunity to earn the welcome bonus on each Amex card once per lifetime. Authorized users can earn their own bonus if they open the card later, because they never had the opportunity to earn it themselves while on your account.
However — before adding anyone to your account, consider the Chase 5/24 rule and its impact on your authorized user’s future Chase card applications. I’ll explain.
What is an authorized user?
An authorized user is someone that you, the person who applied for and opened the card, are allowing to use your credit line. Your authorized user will get their own card in the mail, and they can use it however they like. However, only the primary cardholder can access the account and make changes. Your authorized user can’t see your balance, transaction history and other sensitive information.
Also, any rewards earned by the swipes of an authorized user pool to your account. They won’t earn their own rewards.
Banks don’t perform a credit inquiry when an authorized user is added, as the primary account holder is responsible for paying all charges. That’s good news, because hard pulls can temporarily lower your credit score by a few points.
However, certain banks still ask for the authorized user’s social security number, to add the new account to their credit report.
Perks of adding an authorized user
Lots of cardmembers add a partner or loved one to their card accounts. MMS readers have commented in the past how becoming an authorized user on their parents’ accounts have helped them be approved for their own cards much faster. Besides a potential boost to the authorized user’s credit score, there are other benefits of adding someone to your account, like:
- Easily track spending and manage expenses
- Help the authorized user learn how credit cards work
- Any purchases made by the authorized user will earn miles and points in your account
- Meet minimum spending requirements faster
- Some cards offer a bonus just for adding and spending on an authorized user card
There are also many cards that extend fantastic ongoing benefits to an authorized user. For example, when you add authorized users to the Citi® / AAdvantage® Executive World Elite Mastercard®, they’ll get access to the American Airlines Admirals Club airport lounge. As long as they have a same-day boarding pass for eligible American Airlines or partner flight, they can access Admirals Clubs, and even bring along immediate family or up to two guests. That’s amazing!
Read my post on the best credit cards for authorized users if you want to help someone build their credit while unlocking amazing travel perks for them.
Dangers of adding an authorized user
The big warning here is that charges on authorized user accounts are ultimately your responsibility. Before you add someone, make sure it’s someone you trust! They can run up thousands of dollars on your card and they don’t have to pay a dime.
Also, your credit score drops a lot as you approach the credit limit on your credit card. Having an authorized user who spends on the same credit card makes it easier to approach your credit limit. Some banks will let you set a limit to what the authorized user can spend on the card.
I try to keep the overall balance on any credit card less than 20% of the credit line. I sometimes do exceed it, but I then pay off the balance online the next day.
The primary cardholder’s credit score can decrease if the authorized user maxes out the credit limit on the card or makes charges which the primary user can’t pay. And reciprocally, the authorized user’s credit score can be negatively impacted if the primary card holder fails to make their payments on time or maintains high balances on their account.
Adding your child as an authorized user
Authorized user cards are great for kids because they can jump start a credit history and increase their score. Jasmin’s daughters both have authorized user cards on her Chase Sapphire Preferred® Card account. Not only is this helping her daughters establish credit history, but Jasmin also benefits.
Being an authorized user can be an educational experience for your children. Plus, showing your kids the value of miles, points or cash back can help them get excited about their future in the hobby. You can teach them about:
- Avoiding fees
- Paying card balances in full each month
- Staying organized and managing bill payments
Note: Some card issuers require an authorized user to be a certain age.
The account should link to their credit profile based on home address. Keep in mind, even though your children might have a credit history and credit score, it can be difficult to track, because to sign-up for helpful credit monitoring tools, you must be 18 years old.
After establishing credit history as an authorized user, your child can apply for their own travel credit card when they turn 18. Because your son or daughter will have ahead start with credit cards, it’s possible they might qualify for the best travel credit cards right out of the gate!
Also keep in mind that most banks allow you to include income from others (like parents) if it’s used to pay your bills. Even if your child doesn’t have steady income or a full-time job, they’re still eligible to get a card and earn a new cardmember sign-up bonus.
Consider the impact for Chase application rules
Keep in mind, to earn a new card sign-up bonus, an authorized user will have to apply for the card themselves.
An authorized user account will appear on your credit report and does count toward the Chase 5/24 rule. This means if the authorized user has been added to or opened five or more credit cards (not counting certain small business cards) in the past 24 months, they won’t be approved for the best Chase credit cards, like the Chase Sapphire Preferred® Card or the World of Hyatt Credit Card.
If your authorized user wants to earn the welcome bonus on a Chase card in the future, you might want to hold off on adding them to multiple accounts. It’s worth noting that we’ve received data points of customers having success asking Chase to reconsider applications if their recent new accounts are only authorized user cards, but there’s no guarantee.
Authorized users are eligible to earn a new card intro offer on the same card if they decide to apply in the future. There are lots of benefits when adding an authorized user to your account, especially if it’s your child. Becoming an authorized user can help establish credit history and boost their credit score.
Just keep in mind, an authorized user account may count towards Chase’s tougher application rules. This means having five or more new authorized user accounts in a 24-month period could restrict them from earning lucrative sign-up bonuses on most Chase cards.
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