What Is Additional Cardholder?
An additional cardholder, also known as an authorized user, is secondary user on another person's credit card account. This arrangement can be beneficial for the additional cardholder but has potential dangers for the primary one. Here is how adding (or being) an additional cardholder works, along with some possible alternatives.
Key Takeaways
- An additional, or authorized, cardholder is a secondary user added to a credit card account by the primary cardholder.
- Additional cardholders are often people who wouldn't qualify for a card on their own because they have little or no credit history.
- Additional cardholders can begin to build a credit history if the credit card issuer reports payments to a credit bureau.
- Primary cardholders remain responsible for the account and can see their credit damaged if the additional cardholder runs up charges and won't pay for them.
How to Add an Additional Cardholder
Most credit card issuers allow the primary cardholder to add other people—frequently a family member, such as a child—to their account, often for free but sometimes for a small charge. Some card issuers set limits on the number of additional cardholders per card, and some also set minimum age limits, but even those that do may accept children as young as their early teens.
Generally, the primary cardholder will only need to provide basic information, such as the additional cardholder's name and date of birth, and the credit card issuer will not perform a credit check on them. Some financial institutions allow existing cardholders to add another cardholder online. In other cases it may require a phone call.
Once added, the additional cardholder will receive a credit card in their name, sometimes with the same number as the primary account and sometimes with a unique number linked to that account. They will then be able to make transactions using that card.
In most cases, the additional cardholder will share the same credit line and have the same credit limit as the primary cardholder. However, at least one card issuer, American Express, allows primary cardholders to set a separate credit limit on the additional cardholder, which can be as low as $200.
Importantly, regardless of whose name is on the card, the primary cardholder remains responsible for any charges on it.
Why Add a Cardholder?
A common reason for adding someone as an additional cardholder is that they wouldn't be able to qualify for a credit card on their own. That may, for example, be because they are just starting out in life and have little or no credit record for credit card issuers to judge them by. That is sometimes referred to as having a thin file and is common with students and new graduates, for example.
Becoming an additional cardholder is also a way for them to ultimately qualify for a card on their own. As one major credit card issuer explains, "You don't need good credit (or any credit) to become an authorized user, but if the bank or issuer reports your card's full on-time payment history to the credit bureaus, you can begin to build a positive credit history."
Not all credit issuers report to the credit bureaus, so it's worth asking about. Also, bear in mind that card issuers not only report on-time payments but any late ones, and a series of those can lead to a seriously negative credit history and poor credit score.
Pros and Cons of Taking on an Additional Cardholder
While becoming an additional cardholder can make sense for that person, it has both pros and cons for the primary cardholder.
The major pro is probably convenience. The additional cardholder will be able to handle a variety of transactions without the primary cardholder needing to be involved. This can work well if the additional cardholder is a responsible and trustworthy individual, which is one reason primary cardholders should be careful in who they consider adding.
Another potential benefit is credit card rewards. By putting another person's purchases on their card, the primary cardholder stands to earn more cash back, airline miles, or whatever the card has to offer.
The major cons are the risks to the primary cardholder's financial well-being and credit standing. Because the primary cardholder remains responsible for all of the charges on the card, they will have to come up with the money each month to pay the bill, whether or not the additional cardholder contributes. If they are unable to make payments in time, their credit score will suffer. Worst case scenario, if the additional cardholder runs up huge bills and fails to pay them, the primary cardholder could face bankruptcy.
Alternatives to Adding or Being an Additional Cardholder
People who might not qualify for a regular credit card on their own have a number of alternatives besides becoming an additional cardholder. Those include:
- Opening a joint credit card account
- Opening a credit card account with the help of a co-signer
- Applying for their own secured credit card
Additional Cardholders vs. Joint Accounts
Unlike an authorized user, who is added to an existing account, joint account holders apply for a credit card together, and both of their credit histories are taken into account by the card issuer in deciding whether to approve the application. In addition, joint account applicants must generally be at least age 18, while additional cardholders can often be younger.
The other key difference is that both joint account holders are responsible for the payments on the account, so the onus isn't on just one of them.
Joint accounts can be helpful to a person with a weak credit history who wants to get a credit card, as long as the other person has a strong one to make up for it. However if two people are looking to share an account, the additional cardholder approach may be faster and easier.
How Does Co-Signing for a Credit Card Work?
A person who might not otherwise qualify for a credit card can also ask another person, typically one with a longer and stronger credit history to co-sign their application for a card in their own name. That is, if you can find a card issuer that allows it, as many don't. As with a primary cardholder who takes on an additional cardholder, the co-signer will be stuck with the bill if the other person fails to make payments. So the same cautions apply.
How Does a Secured Credit Card Work?
With a secured credit card, the cardholder deposits a sum of money into a bank account with the card issuer. The deposit becomes the credit limit that they can then charge against when they use their new card. If they pay their credit bills reliably each month, they will usually be able to graduate to a regular, unsecured card after a certain period of time.
Can You Remove an Authorized or Additional User From Your Credit Card?
Yes, just as you can add users to your credit card, you can remove them by contacting your card issuer. The Consumer Financial Protection Bureau notes that, "You can also ask the card issuer if you should get a new card with a new number. This may be a good idea if the authorized user has your card number."
The Bottom Line
An additional cardholder generally gets to enjoy all the benefits of a credit card account without any liability, which remains the responsibility of the primary cardholder. For that reason, cardholders need to be very cautious about adding additional cardholders on their accounts.
