Credit Card Authorized Users in Canada: What You Need to Know

Have you ever heard of a credit card authorized user? It’s a simple idea. One person, called the primary cardholder, lets another person use their credit card. This can help build credit, split family expenses, or help someone learn how credit cards work. But it’s not without risks. This article explains everything you need to know about authorized users in Canada, including the benefits, the risks, and how to use this tool wisely.

What Is a Credit Card Authorized User?

An authorized user is someone that the primary cardholder, the person who owns the card, adds to their account. For example, a parent might add a child or a couple may share a credit card as well. While the bank will send a new card to the authorized user, the account still belongs to the primary cardholder.

What can an authorized credit card user do?

• Use the card to buy things, like groceries, gas, or clothes.
• Earn rewards if the card has cashback options or travel points.

What can’t an authorized credit card user do?

• Generally they cannot change the credit limit (how much money you can spend).
• Close the account 
• Add additional people as authorized users

The primary cardholder always pays the bill, even if they didn’t make the purchases. That’s why trust is very important when you add someone as an authorized user on your credit card.

Authorized User vs. Primary Cardholder: Key Differences

Here’s a quick comparison between authorized users and primary cardholders:

If you’re the primary cardholder, you’re 100% responsible for the activity on the credit card. If you’re the authorized user, it might help you to build credit or earn rewards, but you don’t have control over the account.

How Authorized Users Affect Credit Scores

One reason people become authorized users is to boost their credit. Credit scores are like a report card for your money habits. If the primary cardholder pays their bill on time and uses the card responsibly, the authorized user might see their credit score improve. But this depends on the bank. Some banks tell the credit agencies about the account activity (like payments and balances), while others don’t. So, it’s a good idea to ask your bank: “Will my activity as an authorized user count toward my credit score?”

If the answer is yes, here’s what might help enhance your credit score:

• A longer credit history (if the account is old).
• Lower balances when you use the card wisely.
• Timely payments by the primary cardholder.

If the primary cardholder pays late or charges too much to the card, the authorized user’s credit could suffer as well. 

To learn how to improve your credit score, read FinlyWealth’s article on 8 tips to help boost your score.

Benefits of Adding an Authorized User

1. Builds Their Credit History

Newcomers to Canada or teens with no credit can start their credit journey by being an authorized user before they get their own card.

2. Easier Family Spending

Couples and parents can share an account for bills, groceries, or emergencies. It can help track shared spending in one place.

3. Earn Rewards

If the card offers cashback or points, the authorized user might benefit. But rewards usually go to the primary cardholder.

Risks of Adding an Authorized User

1. The Primary Cardholder Can Inherit Debt Problems

If the authorized user spends too much, the primary cardholder is legally responsible. Late payments or high debt levels can also cost you money and hurt your credit score.

2. Spending Disagreements

Without clear rules, friends or family might argue over the spending on the card. For example, a teen might buy a $200 video game without asking.

3. Credit Score Damage

If the primary account is managed poorly, the authorized user’s credit can drop, even if they didn’t misuse the card. This depends on the bank’s reporting policy, though.

Who Can Be an Authorized User?

• Teens and Young Adults: Parents can teach money management with set limits.
• Newcomers to Canada: It’s a fast way to start building credit (compared to waiting for a personal credit card).
• Spouses or Roommates: Works best if both people agree on spending rules and there is a high level of trust.

Who Should Avoid It?

• People with Poor Spending Habits: If someone often spends more than they can pay for, adding them as an authorized user could cause problems.
• Friends or Those in Casual Relationships: It’s safer to stick to immediate family and those close to you when sharing a credit card.

Authorized User vs. Joint Account

A joint account is different because both cardholders may share equal responsibility and credit impact. Depending on the card setup, each person can be fully responsible for the balance and payments. This means that any missed payment can affect both credit scores. That is different from an authorized user setup, though, where the primary cardholder remains responsible for the account. Both joint accounts and authorized user arrangements are available in Canada, so it’s best to speak with a representative at your financial institution to understand your options and get started.

How to Add or Remove an Authorized User

Most banks let you add an authorized user easily:

1. Login to online banking or call customer service.
2. Provide the person’s full, legal name and their birthdate.
3. Request a physical card (optional). It usually arrives in 1 to 2 weeks.

To remove someone as an authorized user, just call the bank. You don’t need their permission. You can also deactivate the card instantly if needed.

Setting Rules is Very Important!

Before adding someone as an authorized user, be sure to agree on:

• How much they can spend each month.
• What they can buy (e.g., groceries, not luxury items).
• When you’ll check the account to review spending.
• What happens if rules are broken? For example, you can remove them from the account.

Rewards and Authorized Users

Most credit cards pull reward activity from all users. But the rewards themselves usually go to the primary cardholder. For example, if the primary user gets 1% cashback, both the primary cardholder and the authorized user earn rewards, but the authorized user can’t use the points themselves.

If rewards are important to you, check out: Best Rewards Credit Cards in Canada

If you have questions or run into issues such as a billing dispute or unauthorized charges, contact your financial institution right away for help. Keep in mind that the primary cardholder is responsible for working with the bank to resolve any problems on the account.

Final Thoughts

An authorized user can be a great tool if used wisely. It can help build credit, simplify expenses, and keep family finances organized. But without clear rules and trust, it has the potential to hurt both relationships and credit scores.

If you’re a primary cardholder:

• Pick an authorized user who you truly trust.
• Set limits and communicate often.

If you’re an authorized user:

• Stay within the rules.
• Remember, it’s not your account to control.

In the end, credit cards are tools: used right, they can help. Used incorrectly, they can cause trouble. This is why it’s important to always be smart with credit!

For newcomers learning to build credit: Read How New Canadians Can Build Credit Quickly in Canada for helpful steps.