Matt About Money

Use caution when adding a friend as an authorized user


No matter what your repayment arrangement is, you are ultimately responsible for any debt

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Dear Opening Credits,
I am about to add my friend to my Discover Credit card as an authorized user to help her build credit. My question is this: she currently lives on food stamps and government benefits. If I add her to my account, will that jeopardize her government benefits/food stamps? She lives in California. Jonathan


Dear Jonathan,
Adding someone to your personal credit card is a generous gift. Go through with the plan and your friend will enjoy equal charging rights on your account as you, without having to pass through any of the same hoops that you did to get it (like secure a steady income, create a positive credit history, then research and apply for the right card).

It’s true that as long as the account is kept in good standing, your friend’s poor credit rating will improve, provided your credit history with that card is spotless — meaning no late payments and having a zero or low balance. If you’ve mishandled the card account in any way, I wouldn’t bother as you want to pass along the best credit behavior possible.

When you add someone as an authorized user to your card, information about that credit card will appear on their consumer credit reports. Since the data on these reports is used to create credit scores, a well-managed account — indicating low or no revolving balance plus on-time payments — is sure to help. It can offset a bit of the damage caused by missed payments, high debt, collection accounts, bankruptcy, monetary judgments, property liens, legal fines and defaulted student loans.

So how might this line of credit affect the amount and type of government benefits your friend is receiving? It won’t. That should put her mind at ease, and possibly yours, too.

Yet I advise you to be aware that making someone an authorized user on a credit card is risky business. If your friend overcharges on the new card that arrives with her name on it, you could wind up with a balance so big you can’t meet the payments. No matter what kind of repayment arrangement you make with your friend, ultimately you are responsible for the balance on the card account.

Authorized users can end their association with a shared card by making a phone call to the credit issuer and just asking to be removed from the account. Typically, the credit history attached to that card will automatically drop off after a billing cycle or two. If not, to remove it from their reports, they can submit a dispute with one of the credit reporting agencies, which will notify the others.

I urge you to be cautious. Make sure your friend has the means to repay any charges she incurs by asking about her expenses and the amount she receives in benefits. How much debt does she currently have, and is she repaying it responsibly? It is not out of line to request that she provide you with a copy of her credit report. You need to be fully aware of what you’re getting into, as your credit history and financial health is on the line!

Reconsider the arrangement if she hesitates to provide these details, if she owes too much already, or has a recent history of paying late or reneging on loans. Another option you can explore is adding your friend as an authorized user, but never providing her with the card or account number. That way, you can rest knowing you’ve been helpful without the worries of any reckless charging.

Committed to bringing your friend on board and giving her a card? Great. Draw up a contract. Write down your terms, including what the card is to be used for, how much she may charge, the way you expect to be reimbursed and when the money needs to be in your hands.

Finally, monitor account statements often and carefully. If all is as it should be, wonderful! Your gift went to a worthy person. But at the first sign of abuse or if she’s late on her payments to you, contact the issuer and revoke her authorized user status immediately.

See related: The good and the bad of credit account ‘piggybacking’,  Restoring credit after authorized user status goes bad


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