Are you thinking about adding an authorized signer to your credit card as a way to help them build or restore their credit score? Although this is a kind gesture, it can cost you if the person you trust to use your card is not financially responsible. And you should continue to practice good credit habits or risk damaging the credit of your signer. Here is a closer look at the pros and cons of adding an authorized signer to your account.
Pros
Having a good credit score is the key that unlocks many financial gains. Lenders are more willing to work with people who have better credit history, and if you have a partner, spouse, or other family member struggling with a low credit score or bad credit, it can be such a big help to them to let them be an authorized signer on your account. As an authorized signer, they will be able to use your card to make purchases, but they aren’t responsible to the card issuer for payment, according to Chris Kissell, writer for U.S. News & World Report.
“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,” Kissell adds.
If you do add an authorized signer to your account to beef up their credit, make sure the issuer of your card reports credit activity on the authorized signer’s behalf to Equifax, Experian, and TransUnion, the major consumer credit bureaus, so your signer gets the credit they are seeking, advises Sarah Brady, writer for CreditKarma.com.
If you are sharing a credit card with rewards with an authorized signer, you’ll reap the benefits of their purchases, too, according to Lindsay Konsko, writer for NerdWallet.com. So you’ll get more miles, cash rewards, or specific benefits from your card than you could if you were using it solo.
“Some credit card companies also give bonus points for adding an authorized user,” she adds.
Cons
There are a few drawbacks to adding an authorized signer to your credit card account. Kissell warns that as the cardholder, you’ll be responsible for making payments and you may even be charged a fee to designate someone as an authorized signer. Plus, you have to monitor not only your money management habits but also those of your authorized signer. Their mistakes can hurt your score, and your mistakes can knock out the credit they’re trying to build.
“If you miss credit card payments or rack up a big balance, both your credit scores and your authorized user’s scores could take a hit. Similarly, if the authorized users make a mistake, like throwing off your credit utilization or making a late payment on a card connected to your account, it could negatively impact your credit,” warns Brady.
You’ll also need to consider the privacy and security of your credit account. Your account information, like your account’s billing information, is accessible by the authorized user, Brady adds. Your signer should understand the importance of safeguarding this information.
Before you authorize someone else to use your credit card account, be sure you both understand the benefits and potential drawbacks.