If you have a family member whose credit score is in the basement, putting him on your credit card might be a way to turn that around. As a joint or authorized card user, he gets access to credit despite his history; this also works for children or siblings who don't have much credit history yet. It's a generous act, but it has potential risks.
Adding a family member or a spouse on your card as an authorized user helps them build credit, but not as much as if she had her own card. She's not responsible for the payments -- you are -- and some credit-reporting companies may not even list her card on her credit report. The catch with doing this is that if she goes wild and rings up big bills, you're the one the card company will look to for payment. If she stops paying her way, you either pay for her spending or watch your own credit rating plummet.
One alternative to adding a new user on your card is to take out a new card in both your names: The combination of both your credit histories may serve where your child's credit alone would not. With a joint card, your co-owner is as liable for the bills as you are -- but if he refuses to pay, you're in the same vulnerable position as if he were an authorized user.
Even if your authorized user pays her bills, she may not pay them as much as you'd like. If she carries a balance on the account, the card company can charge interest on every purchase either of you make, from the moment you make it, adding to your costs. Carrying a balance lowers your credit rating, too, because you owe money and because you're closer to maxing out the card. The amount of debt you owe counts for 35 percent of your credit score.
If you're the one who falls on hard times, your authorized user or joint holder shares the same risks you do: he could wind up seeing his own credit score fall because you had a bankruptcy or defaulted. Authorized users aren't technically liable for the balance, but some card companies have sued them to collect on the primary owner's debts. Even divorce may not break the connection between joint users: if your ex-spouse reneges on an agreement to pay off the card, the credit card company can still come after you.
- What Married Couples Need to Know About Credit Cards
- Can an Authorized User on a Credit Card Be Held Liable for the Balance?
- Will My Bad Credit Affect My Husband?
- Will I Be Able to Build Credit If My Husband Adds Me to His Card?
- Can Being a Co-signer on an Established Credit Card Help Increase Your Credit Score?
- Authorized Signer Vs. Cosigner on Credit Cards
- Is a Husband Responsible for His Wife's Credit Card Debt Even If His Name Is Not on the Card?
- "If I am Married, am I Responsible for My Wife's Credit Card?"