What authorized users can and can't do with your credit card
Dear Opening Credits,
Can an authorized user of a credit card increase the credit limit on the card without the knowledge of the primary cardholder? If this is not allowable, who then is responsible for the additional credit card charges? -- Ken
Is a friend or family member hanging out on your card and causing a bit of trouble? Or is it you who is attached to someone else's account and curious about the extent of your power and culpability?
In either case, here are the facts about what an authorized user is -- and just what such a designation entails.
Credit card holders may be able to add other people to their existing accounts as authorized users. Most credit card companies allow this as a feature. However, unlike the situation with co-signers, the card company won't assess authorized users' personal, financial and credit information as issuing criteria, so users possess no ownership of the account at all. What these add-ons do have is a credit card with their name on it and the ability to charge goods and services, right on up to the credit limit.
While the actual account owner may expect an authorized user to repay all of his or her charges, the credit card company can't do much to collect, even if the user rang up every penny of the balance.
Clearly, authorized users enjoy some rather fine privileges. But can they also contact the credit card company behind the account owner's back and secure a higher credit limit?
In fact, the very idea is pretty comical. That would be kind of like you visiting a friend for the weekend and switching on their TV. Not seeing your favorite channels, you pick up the phone and call the homeowner's cable company to request an upgrade to the premium package. You can't do that! Your name isn't on the bill; you're nothing more than a houseguest -- and one who probably wouldn't be invited back if you tried this type of presumptuous stunt.
Same goes for authorized users; you're just a card guest. If you attempt to increase the credit line, the credit card company will ask for your name and account information. As soon as they find out that you aren't the owner, they'll shut you down fast.
Now, for your question about who is liable for "additional" charges, I assume you mean the debt that an authorized user incurred. As I explained, the credit card company cannot legally pursue payment from that person, but the account holder might be able to. In fact, owners and authorized users should always form some sort of contract beforehand that stipulates the way the account should be used.
For example, a mother might add her child -- an adult college student -- to her account. Their agreement could read something like, "This credit card is only to be used for necessary books and materials. All charges must be repaid in 60 days." When both parties sign, a legal contract is formed. If it is breached or broken, a lawsuit can commence.
I must say that I'm not a big fan of sharing plastic in this or any other way. It's just too complicated for my taste. The credit activity of all parties will show on every cardholder's credit report, and if problems erupt -- as they often do -- owners and authorized users alike will suffer equally.
If you want to charge, apply for and obtain your own account. It can be done, even if you have bad credit or no credit. And if you have a card in your name already, it's usually a good idea to keep it to yourself.
See related: How to get your free consumer credit report, The 5 basic parts of a FICO score, 8 things to know about credit scores and reports, A guide to the Credit CARD Act of 2009, Credit card hardship plans: a little-known alternative, 10 ways students can build good credit, Authorized users don't have to pay for cardholder's missteps
Erica Sandberg is a nationally renowned personal finance authority. She’s host of several financial web shows, and a frequent guest for media outlets such as Fox, Forbes, Nightly Business Report and NPR. Erica previously was affiliated with Consumer Credit Counseling Service and was KRON-TV’s on-air credit expert. Her book, "Expecting Money: The Essential Financial Plan for New and Growing Families," was published in 2008 by Kaplan Press.
Published: January 12, 2011
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