The credit card world can be confusing! There are all these different terms and conditions and it seems like no two cards work the same. With that being said, there are some universal terms that all cards abide by. Knowing the difference between some of these terms can be the difference between a good choice and a bad one. Like whether you should have a joint account or just have an authorized user, or even be an authorized user. Like with anything there are benefits to both and knowing the difference will hopefully keep you on the benefits receiving end of things.

What Is A Joint Account?
A credit card Joint Account means there are two people on the account and they are BOTH equally responsible for the account. In other words the account belongs to BOTH people and each party will be held liable for the account. If the account falls behind or is delinquent then it will effect each party equally. This also means that having a joint account could potentially hurt the credit of both people involved. If the account falls behind because of late payments or because of non payment the credit of both people will be negatively affected. The same goes for if the account is kept in good standing, both people will benefit. This could be a way to build up the credit of someone. If two people have a joint account and on has excellent credit and the other does not, the joint account could be very beneficial for the person with not so good credit as long as the account is kept in good standing.

The risk to being a joint account holder it that you have to depend on the other party to equally partake in the management of the account. If that person flakes out then you will be left to pay on the account or your credit will be at risk. This can especially be different if you are going through a break up or divorce. It doesn’t matter if its a personal account or a business credit card account, sometimes things don’t go as planned and when you have a joint account ultimately someone might have to take on full responsibility of the account.

Benefits

• Could be used as a way to build credit
• Both people on the account are responsible to make payments
• Help one person get a credit card/good interest rate
• Easier to manage household finances
• Builds a bond between two people

Detriments

• Both people are legally responsible for making the payments
• Breakups or divorce make it hard to manage the credit card
• One person could use the credit card to hurt the other.
• The debt accumulated belongs to both parties equally

What Is An Authorized User?
A credit card account that has an authorized user means there is someone in addition to the account holder that can use the account. A credit card account owner has the option with most credit card agreements to add authorized users to his or her account. The authorized user is issued a card in his or her own name, and the account owner agrees to be financially responsible for the user’s charges on the account. It is someone who is listed on the account and is able to use the credit card account as they please, just like the account holder. The difference with an authorized user is that they are not legally liable for the balance due on the account. They can use the account as much as they want but they have no financial responsibility. It is for this reason that if you add an authorized user to your account you only want add someone you trust.

If you do decide to add an authorize user to the account there are some things the account holder can do to take precaution. You could ask the card issuer for a lower credit limit. It is common for parents to put their child on their account as an authorized user. In this case, instead of having a $10,000 credit limit you could ask for a $500 limit. This will give you a piece of mind and it is one way for you to limit the use on the account. This is a great tool for teaching a responsible teen when and how to use a credit card wisely

Is there a risk being an authorized user? Banks do report authorized users’ account information to the three major credit bureaus. Equifax and TransUnion list both the positive and negative account information from any shared credit card accounts on the authorized users’ credit reports. However, Experian only includes the positive data from those accounts. When your credit report is used to generate your credit score, the FICO model takes into consideration all of your account information, even if your just an authorized user. That means the card holders late payments are also likely to hurt your credit score.

Benefits

• Can improve the credit of the authorized user
• Convenience of having two users
• The authorized user has their own card with their name on it

Detriments

• Could hurt the credit score of the authorized user
• If the account is in default, the bank may contact you for payment even though you are not legally responsible
• Only the account holder is legally responsible for the account

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