Have you ever added an authorized user to your credit card account, but later realized it was a bad idea?
Although you're still on the hook to pay for an authorized user's past purchases, “it's easy to take someone off your account,” says Lita Epstein, author of “The Complete Idiot's Guide to Improving Your Credit Score.”
Even so, getting an authorized user removed from your account can be a touchy situation. Here's how to navigate it.
Why would you want to remove an authorized user?
Any time you add authorized users to your account, they typically get a credit card with their name and a separate card number. What they don't receive, however, is any responsibility to pay the balance, meaning you are taking a risk.
Adding an authorized user is different from opening a joint credit card account in which two consumers — spouses, for example — apply together and share equal responsibility for the account, says Natalie Brown, a spokeswoman for Wells Fargo. When you add an authorized user, that person gains the ability to make purchases on your account, but you've got the full obligation to keep the account in good standing, Brown says.
This arrangement can lead to sticky situations that might send you hurrying to pull an authorized user off your account, says Greg Meyer, community relations manager for Meriwest Credit Union.
“Give someone your card, and they have carte blanche to use it,” Meyer says. “They can go to casinos, go to hotels, buy airline tickets — whatever they want.”
Here are some common scenarios in which Meyer says someone might want to remove an authorized user:
- A business owner adds an employee as an authorized user on a business credit card so the employee can buy office supplies. Later, the boss spots a charge for a pricy steak dinner.
- A parent adds a college-age child so the child can buy textbooks. Then Mom or Dad sees that the card has been used at a campus bar.
- A wife adds her husband to a rewards card account so they can rack up more points for a romantic vacation. But the relationship goes south and soon the only trip she's planning is to the courthouse, to file for divorce.
On the flip side, it might be the authorized user who wants to cut ties. For example, if a cardholder added you as an authorized user and then ran into financial problems and started making late payments, you probably want to dissociate yourself from the account to avoid damage to your own credit. In that case, you can contact the credit card company yourself and asked to be removed.
Removing an authorized user: what to do
So if you're regretting your decision to add an authorized user, what you do next depends on the situation and your relationship with the authorized user, Meyer says.
A case of all-out theft — for example, you added an employee and told her she could buy certain items needed for the business, but she bought herself a couch — is different from a mistake made by your kid, Meyer says. But, in general, here are the steps to take:
1. Check the charges on your account. If you have an authorized user, you should be closely monitoring your credit card transactions online anyway — and even setting alerts to let you know when a purchase over a certain amount (say, $200) has been made, Meyer says.
“You might trust an authorized user, but you want to keep an eye on them,” Epstein agrees. Scour your online statements and figure out exactly what charges the authorized user has made and calculate the total.
2. Have a conversation about what happened. Some cases are not clear-cut, and you might need more information. In that case, sit down with your authorized user and ask what happened. If you decide it was an honest mistake or lack of communication that caused the problem, you might want to keep that person on the card but clarify in writing exactly how the card is to be used in the future, Meyer recommends. Let them that if the agreement isn't followed, you'll cut off card-use privileges:
“Removal is the ultimate threat,” Meyer says.
3. Take immediate action if necessary. However, it's possible the authorized user has seriously abused the privilege or broken your trust — maybe by spending wildly, making it hard for you to pay your bill or pushing you over your credit limit. In this case, call your card issuer immediately, Epstein says. Most issuers will remove the authorized user right away. For example, with Bank of America, the cardholder or authorized user can call or write to the issuer and the change goes into effect immediately, according to Bank of America spokeswoman Betty Riess.
4. Consider getting a new card. If you also gave your authorized user account information (such as your own card number and security code) that would allow the ex-authorized user to continue to make purchases with your account, you may need to take an extra step. If you suspect a former authorized user would use that information against you, Wells Fargo recommends requesting a new card with a different account number, Brown says.
5. Try to rectify the situation. Maybe your teenager went on a spending spree and used your card to buy a closet full of new clothes. Or your spouse purchased a new flat-screen TV without telling you. In those types of situations, try to get the authorized user to return the items for a credit to your account. If that's not possible, , try to get the user to agree to pay you back, Meyer says.
Finally, it's wise to think twice before adding another authorized user to your account in the future.
“You're ultimately the one who will be hurt if you can't pay that bill,” says Anthony Sprauve says director of public relations at myFICO.com.
If you remove yourself as an authorized user to prevent credit damage, what happens to that account information history on your credit reports depends on the credit bureaus' policies.
With TransUnion, when you are removed as an authorized user, the entire account including the history is deleted from your report, according to TransUnion spokesman Clifton O'Neal.
Experian, meanwhile, has a policy of reporting only positive credit information on an authorized user's report, according to Rod Griffin, director of public education for Experian. If you are an authorized user, the account history will continue show up on your report only if it's not delinquent, he says. Once you are removed as an authorized user, you can choose to keep the account history up to the time you were removed as a user, or you can contact Experian to request that the record of the account be deleted from your credit report, Griffin says.
Equifax, meanwhile, will stop reporting new information associated with the account once you're removed as a user. However, history up to that point will continue to be reported for the usual seven years (if the account was not paid as agreed) or 10 years (if the account was paid as agreed).