Depending on your situation, adding someone as a joint account holder or authorized user on your credit card could be beneficial to you and them. However, before you take the leap you should carefully consider the long-term implications of giving someone access to your credit.
Creditworthiness
No matter whom you’re considering as a joint account holder or authorized user, you should check their credit report. Do they have recent late payments, charge offs, and a large debt load? If so, it may be very likely they won’t responsibly handle your credit card. On the other hand, if the person has little credit or good credit, they’re a safer bet.
Relationship
Many people add their children, significant others, or friends as an authorized user or joint account holder to their account as a way to help the other person build their credit. However, there are a few things you should consider before doing this:
Children – Most credit card issuers won’t add a child under 16 years old to your account as an authorized user and may not allow you to add anyone who is not at least 21 years old as a joint account holder.
Significant Other – If you’re an unmarried person, adding your significant other to your credit card account may be riskier. In the case of an authorized user, you will be responsible for any purchases they make and if the relationship changes for the worse, you could be vulnerable to “rage” purchases. This is also the case for joint accounts. If you’re adding someone (even a spouse) to your credit account as a joint account holder, they have equal power over the account, and it may be difficult or even impossible to get them off the account without closing it.
Friends – One of the easiest ways to ruin a friendship is with money disputes. That’s why you should use caution when adding any friend to your credit account as an authorized user or joint account holder. If you decide to share your credit with a friend, make sure you have a written contract that stipulates the responsibilities of both of you.
In most cases, unless you plan to have a long-term merging of finances such as the case with marriage, there’s no need to add anyone to your credit accounts as a joint account holder.
Lender Policy
If you decide to move forward with adding someone as an authorized user or joint account holder, you should talk to your lender about the following:
- How authorized user account activity is reported? Will their purchases show up on your credit report? If so, this could have an impact on your credit utilization ratio.
- How easily and quickly you can remove someone as an authorized user?
- How easily and quickly can you terminate a joint account holder relationship?
It’s also important to remember that being married does not mean that you need to automatically add your spouse to your credit account. If your spouse has debt issues, it may be in your best interest to keep them off your credit account at least until they’ve improved their money management skills.
