Credit card companies want cardholders to add authorized users (AUs). The hope is that more users will result in more spend which means more profit for the card issuer. Because of this, it’s sometimes possible to earn points for adding authorized users. But, is that a good idea? There are both benefits and disadvantages to adding authorized users…
Many credit card signup offers include bonus points for adding authorized users. Chase does this with most of their personal cards:
And, Bank of America offers up to 5,000 bonus miles on their Virgin Atlantic card (2,500 miles per authorized user):
Recently, Amex and Citi have jumped into the game by sending emails to targeted cardholders offering bonus points for adding users:
Everyone likes bonus points, but is it worth it? Is it really a good idea to add an AU or two to your account?
Benefits for the Primary Cardholder
Adding authorized user accounts does not affect the primary cardholder’s credit (see this Experian post for details). That’s not really a “benefit”, but at least its not a negative.
The primary benefit of adding an authorized user (besides earning bonus points through promotions) is to facilitate transferring points to the authorized user. With American Express Membership Rewards points, for example, it is possible to transfer points from your account to other people’s frequent flyer accounts, but only if they are authorized users. Similarly, Chase Ultimate Rewards points can be moved only to authorized users in certain situations (see: Chase point transfer rules made simple [Infographic]).
Another “benefit” that credit card companies like to advertise is that your AU can help you earn points and miles through spend. Of course, you as the primary cardholder still have to pay the credit card bills for that spend, but if you’re the one paying the bills anyway it might be useful to you. In most cases, for purposes of meeting minimum spend requirements, earning credit card rewards, and earning big spend bonuses, all AU purchases are treated the same as purchases made on the primary cardholder’s card. The only exception I can think of is with US Bank business cards. A number of readers have reported learning the hard way that US Bank employee card spend does not count towards signup bonus minimum spend requirements.
Benefits for the Authorized User
If the primary cardholder handles the primary card responsibly (e.g. always paid on time and keeps a low utilization ratio), it is possible to help another person’s credit score by adding them as an authorized user.
In most cases, credit card perks (free checked bags, elite status, lounge access, etc.) are available only to the primary cardholder. In some cases, though, authorized users do get some of the perks of card membership. Here are a few examples:
- Starwood Preferred Guest (SPG) authorized users get free, unlimited Boingo Wi-Fi for up to 4 devices (details here)
- All Amex card authorized users get their own Amex Offers (offers such as “Spend $250 or more at Best Buy and get $25 back”)
- Some premium cards that offer airport lounge access also include lounge access for authorized users. Examples include all versions of Amex Platinum cards (not counting Amex Delta Platinum, which is different), Citi Executive AA card, Chase Ritz Carlton card, etc.
- Cards that offer travel and purchase protections usually extend those same protections to authorized users as well (check your card’s benefits to be sure).
Another benefit for the authorized user is, in some cases, the ability to receive points transferred from the primary accountholder. With American Express Membership Rewards points, for example, it is possible for the primary account holder to transfer points to the authorized user’s frequent flyer programs. Similarly, Chase Ultimate Rewards points can be moved only to authorized users in certain situations (see: Chase point transfer rules made simple [Infographic]).
Disadvantages for the Primary Cardholder
Adding authorized user accounts does not directly affect the primary cardholder’s credit. However, the primary cardholder is responsible for all charges made with AU cards.
Additionally, the primary cardholder is responsible for any fees for adding authorized users. With many cards, AU accounts are free, but those that extend premium benefits to the AU typically charge a fee for each AU.
Disadvantages for the Authorized User
There are a couple of significant disadvantages for the authorized user:
- AU accounts usually show up as new accounts on the authorized user’s credit report. In many cases, negative factors (late payments or high utilization, to give two examples) on the primary card will show up on the authorized user’s report as well. This can lead directly to lower credit scores.
- Chase includes AU accounts in their infamous 5/24 rule (in most cases they won’t approve a new credit card if you’ve opened 5 or more accounts in the past 24 months). In other words, being added as an AU can reduce your chances of getting new Chase cards. When that happens, you can call Chase and explain that you are not responsible for paying the credit card bill (where you are the authorized user) and they will reconsider your application, but it definitely adds a hassle factor that you probably wouldn’t want.
When is it worth adding Authorized Users just for the points?
The key is to add AUs only when doing so has no known negatives. Some credit card companies do not ask for the authorized user’s social security number. In those cases, the AU card can still appear on the AU cardholders credit report, but only if there is matching information between your credit report and your AUs. For example, if you share (or have ever shared) a home address, then the matching is likely to occur. So, theoretically, one way to avoid AU disadvantages is to add someone who has no known ties to you.
A better approach, I think, is to add people when the following conditions are true:
- You have handled the primary card responsibly (always paid on time) and will keep it that way.
- Your authorized user has no plans to sign up for many cards within the next two years.
- Your authorized user agrees to be added.
And a bonus if:
- Your authorized user needs help building their own credit.
In my case, both my teenage son and niece are students who will likely benefit from being added as authorized users to my or my wife’s accounts. In those cases, I believe its worth going for the easy points. As a rule, I no longer add my wife as an authorized user (or have her add me), unless we need the ability to transfer points to each other. For me, this is only relevant to Amex Membership Rewards points. With Chase Ultimate Rewards, since we live in the same household and both have Chase Ultimate Rewards cards, we can freely move points from one to another with or without AU cards.
Remove your authorized user cards from you credit report
If someone has added you as an authorized user and you’re not happy with that, you can close the authorized user card and request that it be removed from your credit report. Full details can be found here: Doctor of Credit: How To Remove Authorized User Accounts From Your Credit Report