Adding someone to a credit card account is a relatively simple process, whether you want to authorise an employee to use a company card or you’re assisting a family member in an emergency. However, there are a few things you should think about before, after, and during the process to avoid any hiccups.
Part 1 Deciding Who to Add
1. Understand the benefits and drawbacks of adding an authorised user. When you add someone to your credit card account, they can legally use your card to make purchases. Obviously, giving another person access to your finances is a big decision, so weigh the pros and cons before you start.
There are numerous benefits to adding someone to your credit card account. If someone is unable to apply for a credit card on their own due to a poor financial history, you may be able to help them build a credit score or teach them how to manage money if they pay you back each month. You can ensure that someone has money available in case of an emergency. Having a single credit card account is often more convenient than opening several.
Adding someone to your credit card has some disadvantages. There is an additional liability because you are legally responsible for all actions taken by an authorised user. Any missed payments or damage to your credit score affects both of you. Shared accounts have also resulted in strained relationships between users, as blame is assigned when there are payment issues.
2. Separate an authorised user from a joint account holder. When you add someone to your credit card account, they become a joint account holder or an authorised user. This person’s responsibilities and rights vary greatly depending on their status.
An authorised user has the right to use the credit card issued to the card holder but bears no financial responsibility for repaying any accrued loans.
Joint account holders share ownership of the account and are equally liable for debt repayment as the original cardholder.
You must decide whether the person you’re adding will be a joint account holder or an authorised user based on the financial situation of both parties involved.
3. Understand the impact on your credit score. Many people wonder how and if adding someone to their credit card will affect their credit score. This is information that you should be aware of before making any decisions.
In most cases, credit reports do not include information on authorised users. Adding a user should have no effect on your credit score. You are, however, liable for any charges made by this individual. If the new authorised user abuses their privileges, you may find yourself with large debts that you are unable to pay. This will have an effect on your grade.
The new user’s credit score will be more directly affected. If the credit card company reports authorised users, the account will be listed on their credit report, and their credit score may change for the better or for the worse depending on their financial history.
When you add a joint account holder, both parties’ credit reports will be updated. This, like adding an authorised user, will have no effect on your credit score. However, if there are outstanding charges, a joint account holder cannot be easily removed from the account. Because of the potential longevity of any damage done, your credit report may be negatively impacted more severely.
Part 2 Adding a User
1. Determine who can be added to an account. Many people are surprised to learn that anyone can be added as an authorised user on a bank account with the necessary information. However, adding someone to your account grants them access to your finances, putting you in a vulnerable position. It is not recommended that you add anyone unless you have a solid personal or professional relationship with that person.
You should choose someone you can completely trust or someone who is as concerned about the account’s integrity as you are.
Couples, parent/child, and employer/employee relationships account for the vast majority of authorised user relationships.
Remember that the longer your relationship with the person, the better.
2. Find out what your bank’s policy is. You can usually add authorised users over the phone or online. Bank policies vary, and depending on your circumstances, your specific bank may have additional requirements.
Call your bank and inquire about adding a user. Some banks can do this over the phone or online, but you may need to go in person to discuss the issue or fill out a paper application.
Any concerns or questions should be directed to the bank. Inquire about how to remove an authorised user or joint account holder, as well as your specific financial obligations in relation to the card’s use. Remember that giving someone access to your finances is a risk. You should bring as much information as possible with you.
3. Collect the necessary information. Before attempting to add the user, ensure that you have all of the necessary information. To add a user to your account, most banks require the following information:
The user’s name
Their date of birth
Their social security number
Depending on their policies, your bank may require additional information. Check their requirements ahead of time to ensure you have everything you need before getting started.
Part 3 Discussing the Account with the New User
1. Establish ground rules from the start. Once you’ve added someone to your account, you must establish clear guidelines for how the card should be used in order to avoid misunderstandings that lead to tensions between users. To avoid future misunderstandings, it’s a good idea to put agreements in writing and have both parties sign and date them.
Describe your needs in terms of charges and payment. Do you anticipate this person adhering to any spending restrictions? When the bill arrives, how much money, if any, are they expected to pay? These are issues you should address right away.
When will they be able to use the card? Some people expect their credit card to be used only in emergencies, while others are fine with charging rent and groceries to it. Determine when and for what purposes the card can be used.
What will you do if a rule is broken? Is there anything the new user might do that would cause you to terminate their account? Be clear about your comfort level with regard to the card’s use, as well as when and why you might cut them off.
2. Make a contingency plan for bad times. What happens if someone overspends or refuses to pay? If any problems arise, you should have a game plan in place.
Account alerts can be set up through your bank to keep you informed of any concerning situations. If you have any reservations about the new user, this could be a good idea.
What will you do if someone refuses to pay you? Will you take legal action, or will you simply remove them from the account and move on? You must have a plan in place if anything goes wrong, depending on a variety of factors such as your relationship with the new user.
3. Maintain a constant dialogue with the new user. Do not simply stop communicating once the account is established. Make sure that the conversation about how to use the card is ongoing.
Some people find that scheduling periodic sit-downs to discuss how and when the card is used is beneficial. If there are any disagreements, they can be discussed once a month to keep tensions at bay.
Any potential changes, such as the spending limit on the card, should also be discussed. Open communication is essential for avoiding hostility between you and the card’s new owner.
4. If necessary, remove the user. If problems persist, you may decide that it is best to remove a user from your account.
The procedure for removing an authorised user varies by bank, but in most cases, a phone call or a written request is required. While most banks are either/or, some do require a phone call and a written follow-up request.
Removing a joint account holder may take longer, particularly if you are not the primary account holder. While this can be done in writing or over the phone on occasion, a face-to-face meeting with the bank is usually required. Find out what your bank’s specific requirements are for removing a joint account holder.
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