Are Authorized Users Responsible for Debt?

An "authorized user" is a person who is given permission to utilize the credit extended to another account holder. Credit card companies and other credit grantors allow approved account holders to allow designated individuals to use their account. Although authorized users may incur charges to the account, they are not legally responsible for repaying the debt.

Benefits

A major benefit of being an authorized user is that you can have access to a credit account but do not have to qualify for credit. For example, students and young adults with limited credit can become authorized users on their parents' credit card account. This is a beneficial arrangement for individuals unable to qualify for credit on their own.

Drawbacks

Drawbacks exist for both the original credit holder as well as the authorized user. The account holder runs the risk of the user over-extending available credit. Alternatively, if the account holder defaults on the credit obligation, the negative payment history can show up on the authorized user's credit report.

Prevention

The best way to prevent financial risks for both the account holder as well as the authorized user is to carefully consider the payment history and spending habits of each individual before making the decision to share a credit account. Establish rules that outline allowable purchases as well as who will be responsible for repaying them.