Becoming an authorized user on someone else’s credit card can be a strategic move for various reasons. It involves adding your name to another person’s credit card account, and it can impact your credit, for better or worse. Let’s delve into the good and bad aspects of being an authorized user on a credit card.
The Good
- Credit History Boost
Being an authorized user can help to improve your credit score. The account’s payment history gets reported on your credit report, which, if positive, boosts your credit history.
- Building Credit
This strategy allows individuals to build or rebuild credit without the primary responsibility of paying the bill.
- Access to Credit
As an authorized user, you gain access to someone else’s credit line, which can be beneficial in emergencies or for specific purchases.
- Learning Opportunity
Being an authorized user can serve as a stepping stone, helping individuals to understand how credit cards work before getting one of their own.
The Bad
- Credit Score Risk
If the primary account holder pays late or carries high balances, it could negatively affect your credit score.
- Potential for Overspending
Having access to additional credit might tempt you to spend more than you should, which could strain your relationship with the primary account holder.
- Limited Control
Authorized users can’t make certain changes to the account, such as increasing the credit limit or negotiating interest rates.
- Impact on Relationships
Financial disagreements related to the credit card account could harm your relationship with the primary account holder.
Conclusion
Being an authorized user on a credit card can offer valuable benefits, including helping to establish and improve credit history. However, it also comes with potential drawbacks, such as negative impacts on your credit score and relationships if the account is not managed responsibly.
Before becoming an authorized user, it’s essential to have a candid conversation with the primary account holder about expectations and rules for using the credit card, and to carefully consider the potential risks and benefits involved.