Authorized User vs. Joint Cardholder: Choose Wisely, Spare Your Score

Authorized users can run up debt but aren't responsible for paying it. Joint account holders are both liable for the debt.
Claire Tsosie
By Claire Tsosie 

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Two people who want to share a credit card can do so with either an authorized user arrangement or a joint account.

The main difference between an authorized user arrangement and a joint account lies in who is legally responsible for paying the bill. With a joint account, both people can make purchases, and both are fully responsible for the bill; with an authorized user setup, both can make purchases, but only one is legally liable for paying.

Authorized users

When you add someone as an authorized user on your credit card, that person has permission to make purchases on your account. You can usually add authorized users through your account's online portal or by calling your issuer's customer service line. Authorized users typically get a card with their name on it, and their purchases show up on your statement.

A couple of things to keep in mind when adding an authorized user to your account:

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1. You alone are responsible for paying

Adding an authorized user to your account means promising your card issuer that you will pay the bill. The principal cardholder is the only one legally on the hook for debt on the account. Any agreement you have with the authorized user for reimbursement doesn't change this fact. It's your credit and your responsibility.

If, for some reason, an authorized user doesn't want to be listed on your account anymore, they can usually do so by calling the issuer and asking to be removed. But you don't have that same option. You could be stuck with the bill and, potentially, a ruined credit score if an authorized user runs up debt with your card. Keep this in mind before adding someone to your account, and only add individuals you really trust.

2. You might boost their credit

If you have a much higher credit score than your authorized user, he or she may get a credit score boost when added to your account — if your issuer reports authorized user activity to the credit bureaus. For this reason, parents sometimes add their kids as authorized users to help them build credit.

Another benefit: Some issuers report only positive authorized user information to the credit bureaus, so if you miss a payment or overspend your limit, you won't necessarily cause someone else's credit to suffer. It's important to investigate your issuer's policies surrounding reporting authorized user activity before adding a loved one to your account, because policies vary industry-wide.

Generally, your child needs to be at least 16 to become an authorized user, though some issuers are exceptions. If you decide to add him or her, take the time to discuss credit card basics and lay out ground rules for using the card beforehand.

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A credit card company might use a different term to describe authorized users, such as "additional cardholders" or "account users," but the arrangement is the same: Only the primary account owner is responsible for the bill. The only difference between an authorized user and an additional cardholder is the name.

Joint cardholders

When you have a joint credit card account with someone else, you're both equally responsible for the account. If you and your partner want to tackle your finances as a team, this could be a good way to go.

In most cases, you'll need to apply for a new credit card together to get a joint account — you can't add a joint account holder later.

Here are some things to consider before opening a joint account:

1. You'll share responsibility for paying

With a joint credit card, you're both liable for the debt on the account. By using the account responsibly, you can both strengthen your credit. On the other hand, missed payments and overspending will hurt you both. Remember to communicate often about your balance and payments so neither of you makes a costly mistake.

2. Your credit could suffer if the relationship changes

If you and the joint cardholder have a falling out, or if you decide to stop managing money jointly, you’ll likely have to close the account. This may lower the average age of your accounts and ding your credit scores. In the unfortunate event that the other cardholder dies, you'll also likely be responsible for paying off the card, which could add stress to an already painful situation. In these cases, you may find yourself leaning heavily on other credit lines, potentially hurting your score.

This doesn't necessarily mean that you should avoid opening a joint credit card — but you may want to keep your balance low so that in a worst-case scenario, you won't be left with a large debt.

3. You'll have fewer options

If you want to open up a joint credit card today, you may be out of luck with certain issuers. In 2013, Chase scrapped its joint cardholder offerings for the sake of simplicity. Capital One stopped offering the option over 10 years ago, and American Express never gave it to consumers in the first place.

If you ask your issuer to add someone as a joint cardholder (which issuers don't typically allow), they may assume you want to add them as an authorized user instead. So confirm whether the issuer offers joint credit cards, then find out what the process for getting one is.

The next step

At the end of the day, if you can manage money well with your partner, relative or friend, it won't really matter how you share your credit. You'll both come out ahead because of your good spending habits. If things go badly and you're sharing credit with an authorized user, he or she will likely be less affected; if you're joint cardholders, both of you will suffer.

That's why it's important to keep the conversation about credit going, no matter who you decide to share credit with. With trust and communication, you can boost your creditworthiness together and earn more rewards.

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