(If you’re an authorized user, check with the credit bureaus to be sure the card is being reported on your credit report.) Grab your credit report for free at my Bankrate.
For years, parents have added their teens as authorized users, helping their offspring establish credit while still maintaining control over the spending.
A generous octogenarian added his domestic helper as an authorized user on his credit card account so she could buy supplies for him and food for her family.
“She, in turn, shopped him into the poor house, buying clothes, furniture and jewelry that neither of them can pay off,” says William J.
“The other person could intentionally spend (to increase the balance out of spite).” In the case of a divorce, even if the legal proceedings specify which spouse is responsible for outstanding credit card debt, “card issuers, or collectors working on their behalf, are not bound by this,” says Fred Williams, author of “Fight Back Against Unfair Debt Collection Practices.” “They can try to collect from either or both spouses who were (account holders).
This is because the contract governing the account is still in force and is not modified by the divorce proceeding.” The bottom line is that linking your credit with another person’s credit always has the potential for risks and rewards.
Credit is extended freely, and payment is someone else’s responsibility.
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And even though authorized users are not technically responsible for debt repayment, “lawsuits have been maintained against AUs for expenditures run up not by them but by the card owners who defaulted,” Rose says.
“Once a lawsuit is filed, if the AU fails to answer a summons or effectively defend against the charges, they find themselves stuck with a judgment for charges they never incurred.
And because the Credit CARD Act prohibits people under 21, or anyone unable to establish the ability to pay, from opening a credit card account without a co-signer, more consumers will rely on authorized user status or joint account status to obtain credit, says Guarav Gupta, director of consumer lending and risk at Novantas, a consulting firm for the financial services industry.
Here’s what you need to know before you share a credit card account.
“This can be a great way to teach children how to be financially responsible and how to use credit wisely,” Williams says.