What may have seemed like a good idea at the time that you allowed your loved one or friend to consolidate on your good credit and make purchases using your credit card, may end up not being the best decision ever. Sometimes those authorized users begin to take advantage.
Sometimes dropping authorized users from your credit card completely makes sense. For many, it’s more of an emotional and painful decision rather than a financial one. Still, sometimes managing multiple cardholders becomes more like a nightmare and taking a few off is reasonable.
Here are three signs, perhaps, it’s time to drop an authorized user on your card:
They frequently max out: Suppose you’ve added your teenaged kids as authorized users, but they constantly overspend. This would undoubtedly put a strain on your household budget and hurt your credit utilization ratio. Such a spending behavior would hit you and your kids’ credit scores and push you towards credit card debt trouble.
Before taking action, talk to them and ask them to keep the expenses as low as possible. You can also set limits for different users if your creditor allows this. If overspending continues to be a problem, it may be time to drop your kids off your account.
You are parting ways: After a relationship break-up, most people forget to remove their ex as an authorized user on their credit card accounts. If you make this mistake, you’ll be liable for any debt he or she accrues using the card, and any activity of the card will still affect both of your creditworthiness.
So it’s better to take your ex off your accounts once you part ways. Also, ask your ex to do the same. Don’t forget to change your account passwords as well. Alternatively, close any and all joint accounts so neither of you will have to deal with any future repercussions.
They are financially self-reliant: It’s a great way to help teach your kids fiscal responsibility and a way to monitor their spending before they obtain their own credit; however, it’s meaningless to keep them on your accounts forever. It’s better to remove them from your account once they become financially independent and acquire two or three years of positive credit history under their belts.
*This is a guest post from Andy Masaki
Author Bio: Andy Masaki is an editor with Oak View Law Group and contributes specifically on personal finance topics. You may find his writings at Comparecards, Realmoneyanswers, Familyshare.
My kids are too young for credit cards (or handling more than a few dollars in cash). But I do want to teach limits early so that when credit card time comes they don’t go buckwild.