Joint Account vs. Authorized User
A common practice among parents & couples is to add kids or spouses to their credit card accounts in order to boost the credit history and credit score of the person being added. This is perfectly legal, and it even has a name – credit piggybacking.There are two ways you can add another credit card user to your credit card account – as a joint account holder or as an authorized user (AU) on the account.
Similarities
Credit wise, there is no difference. In both cases, the credit card account appears on both people’s credit report and affects both people’s FICO (*1).
In both cases, the account has one credit limit, one balance, one payment, and one due date. Both people on the credit card account can charge to the card.
Key Differences
There are two key differences between a joint account holder and an authorized user:
- Legal obligations – While an authorized user has no legal obligation to pay back the credit card debt (*2), a joint account holder is as liable for paying back the credit card balance as the primary account holder. The credit card issuer can use all legal methods to go after both people for payment.
- Applying for the credit card – Because a joint account holder is as liable as the primary account holder for paying back the balance, most credit card companies require that each joint account holder must meet the credit and income requirements to be added to the account, and can be denied if the requirements aren’t met.
On the other hand, an authorized user can usually be added to an established account regardless of the user’s credit history.
- Reverting back to a single account holder – An authorized user can be removed from a credit card account with a simple phone call.
On the other hand, a joint account holder cannot easily remove the other person from a joint account, even if one person made all the charges on the account.
A joint account holder may remove himself from the account only after the account balance has been paid in full.
Important Tips
- The person being added to the primary account holder is affected for good or worse. If for any reason the primary account holder neglects to pay the balance on time and incurs a late payment or worse – a charge off, that will adversely affect the secondary account holder as well, even if he/she is only an authorized user and not liable for paying back!
- Sharing a credit card account can be risky, even if the other person if your spouse or child. Consider lowering the account credit limit and the legal liability of paying the balance before adding another person as a joint account holder or as an authorized user.
Notes
- You may be responsible for your spouse’s credit card debt as an authorized user if you live in a community property state (Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin). The laws varies with each community property state so if you are a resident of one of these states, you have research your state’s laws regarding community property.
- Since January 2009, the new Fico version (called FICO 8, NextGen Fico or Fico 08), allows only legitimate authorized users (spouse, parents & kids) to benefit from piggybacking.
Vantage score doesn’t allow for credit piggybacking at all, but less than 105 of creditors use Vantage. Most still use FICO.