What is an authorized user credit card?
An authorized user credit card is a type of credit card that allows someone to have access to a primary account holder’s credit line. This secondary card is often used by parents for their children, employers for their employees, or friends and family members who need to make purchases on behalf of the primary account holder. The authorized user does not have control over the primary account and cannot make changes to the account settings, but they can use the card to make purchases up to the credit limit set by the primary account holder. In this article, we will explore the benefits and considerations of being an authorized user on a credit card.
The primary account holder, also known as the cardholder, has the ultimate responsibility for the account and must pay the monthly statement balance in full or make minimum payments as required. The authorized user, on the other hand, has the privilege of using the card but does not have the ability to manage the account. This means that the authorized user’s credit score will not be affected by the primary account holder’s payment history, but they may be responsible for any charges made on the card.
One of the main benefits of being an authorized user is the potential to build credit history. Since the authorized user’s activity is reported to the credit bureaus, it can contribute to their credit score. This can be particularly helpful for individuals who are just starting to build their credit or have limited credit history. By using the card responsibly and paying off the charges in full each month, the authorized user can establish a positive credit history.
Another advantage of being an authorized user is the ability to access cash advances and emergency funds. In case of an emergency, the authorized user can use the card to withdraw cash from an ATM or make purchases that may not be covered by other means. However, it is important to note that cash advances often come with higher interest rates and fees, so they should be used sparingly.
There are some considerations to keep in mind when becoming an authorized user on a credit card. First, the primary account holder has the authority to remove the authorized user at any time, which may result in the loss of the card and access to the credit line. Additionally, the authorized user may be held responsible for any charges made on the card, so it is crucial to monitor the account activity and report any unauthorized transactions immediately.
In conclusion, an authorized user credit card is a valuable tool for building credit history and gaining access to emergency funds. While the benefits are significant, it is important to be aware of the responsibilities and potential risks associated with being an authorized user. By using the card responsibly and maintaining a good relationship with the primary account holder, individuals can maximize the benefits of this arrangement.
