What to consider before adding authorised user

By Michael Lloyd

Many credit card users choose to add children or spouses to their credit card accounts as secondary cardholders, supplying loved ones with spending money or access to emergency cash. While this is a good deal for the authorised user, it can lead to major problems for the primary cardholder.

If you're considering adding somebody as a secondary cardholder on one of your credit card accounts, you'd be wise to consider the potential consequences before going ahead.  authorised-user

No legal responsibility
Adding a secondary cardholder gives your authorised user access to your available credit. The additional user will get a card, and will be able to
spend on your account exactly as you do -- with absolutely no legal responsibility to pay back what they spend.

"The additional cardholder will not be responsible for any of the debt or repayments and consequently will not be associated with the account insofar as their credit record is concerned," Equifax senior regulatory and compliance officer, Laura Barrett, explained in response to emailed questions.

If your secondary cardholder maxes out your available balance and you don't have the funds to get your account back into good order, all of the
debt plus any fees or interest will legally be your problem, according to Duncan Bowker, head of corporate communications for Callcredit, a company that provides credit reports and scores to consumers.

In addition, if your secondary cardholder behaves irresponsibly with your credit and you're unable to pay back what's been spent, it's your credit score that will suffer.

In the US, it's possible to link a second cardholder's credit record with an account they have been authorised to use, and many Americans use this as a tool to help their kids build a credit profile. This is not the case in the UK.

"There's no such thing as a joint credit card and allowing someone else to use your card account as a secondary cardholder will not link up your credit ratings," Experian's head of consumer affairs, James Jones, said in response to emailed questions. "In fact, it will have no impact on the secondary cardholder's credit rating at all because all activity on the card will continue to be reported just on the primary account holder's credit report under their name."

How to keep authorised user in line
Before adding anybody as an authorised user on one of your accounts, even one of your closet relatives, consider doing the following:

  • Assess the person's ability to pay off what they spend on your card. If you're going to expect your authorised user to pay down any balance they build up, the person in question should have an income.
  • Add your secondary cardholder to an account with a low credit limit if you have any concerns about them behaving irresponsibly. This may be a good idea if, say, you are adding a teen to the account and don't expect him to pay you back for his charges.
  • Set strict rules on how the secondary user can use the card. You can even consider drawing up a document that you each sign.
  • Monitor spending on your account so you can nip any erratic spending in the bud before it gets out of hand. If you haven't done so already, set up online banking for the credit card account in question to help you keep an eye on it.

Remember that you can cancel your authorised user's card at any time. If things aren't working out how you expected, you can call your card issuer to remove the authorised user from your account.

See related: The cost of a poor credit rating, Understanding and avoiding credit card fees

Published: 20 March 2015