Joint Account vs Authorized User: Key Differences and Benefits

When it comes to sharing a credit card, there are two common ways to do so: becoming an authorized user or being a joint cardholder. While both options allow multiple people to use the card, there are key differences between the two arrangements that consumers should be aware of.

One of the main distinctions between an authorized user and a joint cardholder is the legal responsibility for paying the credit card bill. In a joint account, both parties are equally responsible for any charges made on the card. This means that if one person fails to make a payment, the other person is still liable for the full amount owed. On the other hand, with an authorized user setup, only the primary account holder is legally responsible for paying the bill. This means that the authorized user can make purchases with the card, but they are not held accountable for paying off the balance.

Another key difference is the level of control each party has over the account. With a joint account, both cardholders have equal access to the card and can make purchases without needing approval from the other party. In contrast, with an authorized user arrangement, the primary account holder has full control over the account. They can set spending limits, monitor purchases, and even remove the authorized user from the account if necessary.

Additionally, the impact on credit scores can vary between authorized users and joint cardholders. For joint accounts, both parties’ credit histories are taken into consideration when applying for the card and managing the account. This means that both parties’ credit scores can be affected by the other’s financial behavior. In contrast, being an authorized user typically has less of an impact on credit scores since the primary account holder is the one ultimately responsible for the debt.

Authorized users

A few points to remember:

• Before adding someone to your account, it is crucial to consider the potential consequences. If an authorized user misuses your card and accumulates debt, you may find yourself responsible for the bill and facing a damaged credit score. Therefore, exercise caution and only add individuals whom you genuinely trust.
• Adding an authorized user with a lower credit score to your account can potentially boost their credit score, provided that your issuer reports authorized user activity to the credit bureaus. This is why parents often add their children as authorized users to assist them in establishing credit.
• Often when people are trying to recover from a bad credit score, if they are added as an authorized user on an established credit account this can help their credit restoration efforts.

Joint cardholders

A few joint account considerations:

• When you have a shared credit card, both parties are responsible for the debt incurred. Responsible use of the card can help improve both of your credit scores. However, if payments are missed or if there is overspending, it will negatively impact both of you. It is important to regularly check balances and payments to avoid any errors that may report to credit bureaus.
• If there is a disagreement between you and the joint cardholder, or if you choose to discontinue managing finances together, it will probably be necessary to close the account. This action could have a negative impact on your credit scores by reducing the average age of your accounts. Additionally, if the other cardholder passes away, you will likely be held responsible for settling the card’s outstanding balance, which can further exacerbate an already distressing situation. In such circumstances, you may heavily rely on other credit lines, potentially causing harm to your credit score.

In summary, the main differences between authorized users and joint cardholders lie in legal responsibility, control over the account, and impact on credit scores. Ultimately, consumers should carefully consider their financial goals and relationship dynamics before deciding whether to become an authorized user or a joint cardholder on a credit account.