A balance transferred to a credit card account you’re an authorized user on doesn’t become your debt, but it can have an impact on your credit. This is what you can do about it.
Balance transfers can be helpful for managing credit card debt and minimizing interest charges. If you’re an authorized user on someone else’s credit card, you may be wondering how a balance transfer might affect you.
These tips can help you understand the potential impact of transferring balances if you have authorized user status.
See related: Best balance transfer credit cards
4 balance transfer tips for authorized users
Only the account owner can transfer a balance
The first rule to know about balance transfers is that as an authorized user, there are limits to what you can do with the card.
“Most often, credit card companies won’t allow authorized users to complete a balance transfer,” says Jordan Tarver, credit analyst at FitSmallBusiness.com.
If you charge purchases to someone else’s card as an authorized user, typically only the account holder would be able to transfer that balance to another card.
The rules are slightly different if you’re a joint account holder with a spouse or anyone else. In that scenario, you’d both have the same rights and responsibilities.
Not all credit card issuers allow balance transfers to and from joint accounts, says Tarver. “But there are several that give you the option to move your debt to a partner’s credit card.”
The list excludes most major issuers, but Bank of America and USAA allow balance transfers for joint cardholders. You’d both have to apply for the transfer together and move the balance to a new joint account.
Remember, though, that with a joint credit card you’re legally responsible for any balance, including ones you transfer.
Transferred balances don’t become your debt but they do affect your credit
Legally, you’re not responsible for any debt associated with a card you’re an authorized user for. That includes purchases you make, purchases the card owner makes or balances they transfer to the card.
Balance transfers can, however, impact your credit score.The utilization rate on the card affects the credit score of the authorized user, says Leslie Tayne, debt attorney and managing director of Tayne Law Group. Whether that’s good or bad depends on which way the balance transfer moves.
“If the primary cardholder is transferring a balance off of the credit card, it could have a positive effect, while transferring a balance onto the card could have a negative impact,” says Tayne.
Scott Bates, finance blogger at MoneyandBills.com, says that if a balance transfer causes a credit card to be maxed out then it could be bad news for an authorized user.
“Generally, if a credit card is using more than 30 percent of the available credit line it could make someone’s credit score go down,” he says.
Having other credit card accounts that have low or zero balances could help offset the impacts of a large transfer to a card you hold as an authorized user. But if you’re an authorized user because you’re building or rebuilding credit, that may not be an option.
The card’s owner can also see a short-term dip in their scores, but that may be outweighed by the benefits of balance transfers.
Transferring a balance may lead to an easier path of paying down existing debt, which may help credit scores rise again through responsible credit card usage, says Tarver.
Consider whether it makes sense to be removed from the account
If you’re worried about your credit taking a hit because the card owner transfers a balance, you could ask to be removed as an authorized user. But that’s not a guarantee that your credit will be completely unaffected.
For example, if the card you’re an authorized user on has a large credit limit you should think about how that could affect your credit utilization if it no longer shows up as part of your credit history. Not to mention, losing that credit limit could shrink your purchasing power.
When you’re on the fence, weigh your options, says Tayne.
“If the primary cardholder is going to transfer a large balance onto the card, it could have a negative impact on your score so removing yourself could help you avoid that,” she says. “However, removing yourself could also affect the age of your credit, particularly if it was an older account.”
If losing your authorized user status causes your score to go down, there are ways you can build it back up, including:
- Paying your other credit card bills on time monthly.
- Keeping the balances on your other card accounts low.
- Not applying for new credit unless you need it.
You could find yourself in a catch-22, however, if you don’t have any other credit card accounts.
In that case, you could open a new one but your card options might be limited if you don’t have good credit. And each hard inquiry you incur for a new credit card application can knock a few points off your score.
If you’re planning to strike out on your own with building credit, it’s a good idea to check your free credit report first to see where you stand. That can help you decide which cards you have the best chances of being approved for, based on your credit rating.
See related: How to build good credit
Keep the lines of communication open
If you’re an authorized user or you have an opportunity to be added to someone’s card as one, it helps to have some ground rules in place.
“Generally, an authorized user does not want to piggyback on someone else’s account unless there’s a firm agreement in place that the primary account holder will keep the account in good standing,” says Bates.
- That means making payments on time and maintaining a low credit utilization ratio, both of which can help your credit score.
- At the same time, talk about what restrictions the card owner might want to place on how you can spend with the card. Be sure you know what you’re expected to pay, if anything, toward the card balance.
- If the card in question is a rewards card, you’ll also want to discuss who gets to use any rewards that are earned.
- Perhaps most importantly, ask the account owner about their plans to transfer balances to or from the card in the future.
Having clarity about the primary holder’s payment and charging habits will help you make an informed decision about being added to their card as an authorized user.