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The Credit Guy Wednesday, August 14, 2013

Todd Ossenfort Explains Joint vs Authorized User Accounts

Todd Ossenfort examines the difference in user liability for credit between joint account holders and authorized users of credit card accounts.

Is an authorized user liable to pay the credit card balance in the event that the principal has abandoned the debt? Lets examine this question in more detail to help create an understanding of where the liabilities fall when contemplating the differences between authorized users on accounts, and joint account holders. 

Joint Accounts and Authorized Users Explained

This is a confusing topic for many people.  A joint account holder for a credit card account is equally responsible for the balance of the account along with the other person named on the account and is legally liable for any amount due.

An authorized user, on the other hand, is able to use the credit card account, but is not legally liable for the balance due on the account.

Keep two things in mind when deciding whether or not you want to be a joint account holder or an authorized user on someone’s account or how you want another person added when you are adding someone to your own account.

First, a joint account holder will be responsible for the balance, so only add someone that you know is capable and willing to pay the account if you are unable. Likewise, only agree to be a joint card holder if you are prepared to pay the account yourself. Otherwise, both people’s credit will be negatively affected if the account becomes delinquent.

Second, an authorized user has the ability to use the account for purchases just as you do, but without any of the financial responsibility. Only add someone that you can trust not to abuse the privileges that come with having access to your account. Also when you add an authorized user you should ask to put a lower credit limit on that account.  One of the more common uses for adding an authorized user is allowing a child to have their own card but you as the account holder are still in control.  As an authorized user on someone’s account, that person is not legally responsible, but the account does appear on their credit report.

In the past, many people added authorized users to their accounts to boost the credit history of the person that was added. However, authorized user accounts are no longer included in the calculation of credit scores. An authorized user account still appears on your credit report. So if a lender is viewing your actual report and not just your credit score, the account, whether in good standing or bad, may or may not be considered by the lender in making lending decisions.