There are few shortcuts when it comes to building good credit; but piggybacking on someone else’s credit card is one of the few exceptions.
Adding a spouse or other family member as an authorized user on a credit card can often boost that person’s credit within a very short period of time. But there are also significant pitfalls to the practice — which is why it pays to know what you’re getting into.
Common instances of piggybacking include parents adding a teenager to a credit card to give him or her the first (supervised) experience with credit — or a couple deciding to share a credit card to improve the credit of a partner with weak credit. Once a person is added to a credit card account, the credit history associated with that account will appear on the credit report of the authorized user as well. If the account has a long history of regular payments and responsible credit use, that positive record becomes reflected in the credit score of the authorized user.
However, despite the advantages of credit card piggybacking, sharing a credit card account often comes with its own set of problems. In contrast to a jointly held account, where both users are on the hook for the credit card charges, authorized users on a credit card are not liable for charges to the account; only the primary cardholder is liable if a payment is late or missing.
“The authorized user has the best of both worlds,” says Gail Cunningham, Vice President of Public Relations with the National Foundation for Credit Counseling. “He or she gets charging privileges, but has no responsibility for paying the debt.” Needless to say, this is one reason why adding an additional user to a credit card can cause problems.
“We all come into relationships with baggage, and some of that may be financial,” Cunningham notes. “If the couple doesn’t have the same values around spending and saving, it very quickly shows up, when one person is an authorized user on the other’s credit card.”
The primary cardholder may discover that the person added to the account racks up far more charges than expected—and has different standards for how quickly those charges are paid off. Similarly, in the case of divorce, the primary cardholder may not remember to remove his or her ex as an authorized user and could be unpleasantly surprised down the road when bloated credit card bills begin to land in the mailbox.
But piggybacking can also be a drawback for the authorized user. If the primary accountholder doesn’t make payments on time or carries high credit card balances, the bad marks on the account will reflect poorly on the authorized user’s credit as well.
In other cases, being an authorized user simply makes it a lot harder to keep close track of your expenses. This was the experience of Mary, a writer in Des Moines, Iowa. Her husband was trying to meet a spending limit to get into a higher rewards category on his frequent flier rewards card, so he proposed adding her as an authorized user on the account. That way, all their everyday expenditures could be channeled through the rewards card.
It seemed simple enough, but Mary soon discovered that she no longer was able to monitor her spending as closely as she would like. She and her husband had separate incomes and kept separate checking accounts; so he would compile her expenditures every two or three months and then present her with a bill for reimbursement.
“Because I didn’t have a statement arriving with my charges every month, I lost track of my spending,” Mary recalls. “Every single time, I was shocked to learn how much I had accumulated in charges. And worse, online trial subscriptions and other purchases I had meant to cancel sometimes went unnoticed for months.”
Fortunately, it’s not difficult to remove or be removed as an authorized user on a credit card; and both the primary cardholder and the authorized user can make the request. Simply call the card issuer and request that the person be taken off the account.
For most major card issuers, the change will be effective immediately; however, for American Express cardholders, it can take as much as 24 hours before the authorized user is removed. Wells Fargo also asks credit card holders to send in a written request; the account change won’t take place until the bank has received the letter.
Even though it’s easy to get out of a shared credit card account, it may not be so easy to work your way out of the problems that it created. So be cautious before offering to add someone to your credit card or agreeing to be added.
To avoid surprises down the road, make sure that each of you have the same expectations about how much will be charged to the credit card each month, and how those charges will be paid off. If the credit card will be carrying a balance, carefully consider the impact on your credit score before entering the arrangement. The more you talk though potential scenarios up front, the fewer surprises you’ll have later on.