Differences between credit card joint account holder, authorized user and co-signer

If you share credit with another person, your account status is just as important as the credit line and the interest rate.

That’s because it determines how much control you have over the account, your responsibility for the bill and its impact on your credit history.

Unless you opened the account alone (which makes you a primary account holder), your status with shared accounts is likely to fall into one of three categories: joint account holder, authorized user or co-signer.

Here’s what you need to know about the different access and responsibilities that come with each account status.

What does it mean to be a joint account holder?

This label “just means two parties can apply for a card together,” said Mike McLain, senior compliance counsel for the Credit Union National Association.

When joint account holders open the account, they each fill out applications and have their credit checked. They have equal access to the credit line or loan, and each is individually responsible for the entire debt.

A joint account holder has all the rights and responsibilities of a primary account holder. You’ll have your own card and full access to your account information. You can request increases and decreases in the credit line. You can also close the account. And, if the issuer reports to the credit bureaus, they must include the account on the credit reports of all joint account holders.

Each account holder is also completely responsible for the entire debt — not just their own charges or 50 percent of the total, said McLain.

Ending the relationship with your joint account holder doesn’t dissolve your responsibility for the account. Even if a divorce court or mediation agreement assigns the card or card debt to a former partner, that doesn’t erase your initial agreement with the card issuer.

“Your divorce judgment does not bind the credit issuer,” said Chi Chi Wu, staff attorney for the National Consumer Law Center. You’ll need to take action to remove someone from your joint credit card account.

What does it mean to be an authorized user?

Authorized users can use the credit card, but they won’t receive bills and won’t have any control over the account. They can’t request changes to the credit line or add other authorized users. In general, authorized users can request to have themselves removed from credit card accounts by contacting the issuer.

The primary account holder is responsible for paying the balance and can see all spending on the card, so they’ll be able to see how much the authorized user has spent, as well as when and where they shopped.

For the most part, authorized users aren’t responsible for the bills. But in certain circumstances, they could possibly be held responsible for their own charges.

“If it’s something they’ve incurred, there may be state laws that make them liable,” said Wu.

This account status is common among family members. Parents might make their children authorized users to give them access to a credit card for an emergency or help them build a credit history.

Many issuers include authorized users when reporting account use to the credit bureaus, said Nessa Feddis, senior vice president and counsel for the American Bankers Association.

If the account is paid on time and managed well, that would help the authorized user build a healthy credit history and credit score.

“The problem there is if the main user is a bad risk, it could hurt the authorized user,” said Feddis.

What does it mean to be a co-signer?

A co-signer doesn’t have any control over the account but is responsible for paying the balance if the account holder doesn’t pay.

Though many card issuers don’t allow co-signers, the ones that do might require a co-signer if an applicant doesn’t have enough income to qualify for a credit line.

Once you’ve become a co-signer, it’s virtually impossible to reverse the decision. You’ll likely be a co-signer on the account until the primary cardholder closes it and pays the balance in full. This even applies to accounts you open for a child.

“What co-signers might not realize, once you’ve co-signed for a credit card, you’re a co-signer even after that person becomes 21,” said Wu.

The decision to co-sign for someone is not one to make lightly. Every situation is different. But if a bank or lender decides an applicant is a high enough risk that they can’t qualify for credit on their own, that should give any co-signer serious pause.

Since you won’t have control over the account, but you’ll still be responsible for the balance, it could put your finances and credit score at risk.

Bottom line

If you want to help someone learn to manage credit and build a history, consider making them an authorized user or joint account holder instead of co-signing. This way, you can track their spending habits and maintain some control over the account.

And if you have poor or limited credit, these options can help you build a credit history. But you’ll need someone with a strong credit history and responsible spending habits who is willing to help you. Otherwise, it might be better to look at other ways to build credit.