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Technology & Security

3 Tips on Adding an Authorized User

Tip #1 Consider the Implications to Your Credit Score

Adding an authorized user to your credit card may turn into a bad situation if the user goes on a shopping spree and rings up a costly bill. It's important to note, this isn't a joint account, and the user doesn't share the burden with the account holder. The debt belongs to the account holder even if the transaction doesn't.

Another factor that plays an important role in your credit score is your utilization ratio. Cardholders are generally advised to keep their credit utilization ratio, which measures credit used In relation to credit available, under 30%. Adding an authorized user could change this measurement.

Tip #2 Consider the Risks

When you're considering adding an authorized user to an account, you should add people who you can trust. We recommend sitting down with the sibling, relative, or friend before putting them on your card.

It's important to go over some ground rules about how much they'll be allowed to buy, how they're going to pay you back, and what you'll do if you end up carrying a balance.

Blending family and money can strain relationships if things don't go well, so proceed with caution.

Tip #3 Think it Through

Adding an authorized user on your card can give someone an advantage, but you should be careful. You'll need to trust them to not run up debt, and they'll need to trust you to make payments on time.

You're ultimately responsible for what happens, though there are ways to keep tabs on the authorized user. You can access your credit report through annualcreditreport.com and set up text alerts for any spending that happens on the account. Right now Equifax, Experian, and TransUnion are now offering free weekly online reports now through April 2021.

There's a failsafe, too: If it doesn't work out, you can always remove the authorized user.

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Content courtesy of GreenPath Financial Wellness. (October 16, 2020). Consider These Tips Before Adding an Authorized User to Your Credit Card – Money.