I had to drop an authorized user on my credit card. Here’s what happened.

Say you have a family member or friend who has struggled with their credit score. They either ask or you offer to add them to one of your credit cards as an authorized user. What could possibly go wrong?

For the uninitiated, adding someone as an authorized user to your account can help that person establish a credit history and potentially raise their credit score. Authorized users receive their own credit card and can make charges to your account, which you’re legally liable for if they don’t pay them back.

But what happens when an authorized user goes rogue with your credit card? Not only can this strain relationships, but it can also hurt your credit card and cost you money. The three cases below illustrate what happens when authorized users take advantage of the cardholder’s kindness and the lessons the cardholders learned as a result.

Rescuing a cousin in need

Jasmine Charbonier, a performance and personal branding coach, made her cousin an authorized user on her Capital One Quicksilver Cash Rewards Credit Card in March 2020, at the start of the COVID-19 pandemic. “He was really struggling to make ends meet, and I wanted to help family out, because that’s what we do, right?,” she says. “I thought it would be temporary until he got back on his feet.”

The first red flags started popping up about three months in, says Charbonier. “I started seeing charges at bars and gaming stores,” she says. “The spending got bigger and more frequent, and he’d promise to pay but always had excuses. My credit utilization kept climbing higher.”

After six months, Charbonier knew she had to make a tough call after more red flags popped up. “I found out he wasn’t even looking for work seriously, my credit score dropped by 85 points and he maxed out the card twice,” she says. “The final straw was a $1,000 charge at GameStop that he hadn’t consulted me about. It came right after promising to cut back on spending and put the card nearly at its limit.”

But when the time came, Charbonier found that making the decision to remove her cousin as an authorized user was harder than actually doing it. “I called my credit card company, and the process [to remove him] only took about 15 minutes,” she says.

When she went through with her cousin’s removal, Charbonier found $250 in pending charges, on top of the nearly $5,000 on the card. “I ended up paying everything off since I was legally responsible,” she says.

Charbonier’s credit score before adding her cousin was around 780 — nearly perfect. “But it dropped to 695 at its lowest point,” she says. “The high utilization really hurt my score, and it took about six months to recover.”

Then it was time for Charbonier to have what she called an “awkward conversation” with her cousin. “I sent him a text first [because] I was too nervous for a call,” she says.

After her cousin was removed, Charbonier notes that family gatherings were “uncomfortable” for a while. “My credit score has slowly started recovering and my cousin and I barely speak now, which honestly hurts. Looking back, I should have set clear boundaries from the start.”

This whole situation taught Charbonier some hard lessons. “Blood ain’t thicker than credit scores, don’t mix family and finances without clear rules and sometimes helping actually enables bad behavior,” she says. “It’s okay to say no — even to family.”

Making tough decisions

Liam Lafferty, founder of software company Zentive, says he’s had to make some tough decisions when it comes to managing credit and finances. He was forced to remove an authorized user, his brother, from his American Express® Business Gold Card after having him on the account for 18 months.

The tipping point for Lafferty was when he realized that $900 in charges hadn’t been paid for three months. “I called Amex and let them know about the situation,” he says. “I had to pay off the remaining balance of $900, then they removed my authorized user from the account.”

Laffery realized that his brother wasn’t using the card responsibly. “His charges were starting to impact my credit score,” he says, noting that he saw his score drop by 50 points as a result. “It wasn’t an easy conversation, but ultimately, it was the right choice to protect both my financial health and our relationship.”

Building credit in college

Dean Rotchin, CEO and founder of private jet travel membership company Blackjet, made his younger sister an authorized user on his Chase Sapphire Preferred® Card so that she could build her credit when she started college.

After having the card for two years, Rotchin found an unexpected charge on the card — a $3,200 shopping spree at Nordstrom. “This was completely outside our agreement. We had discussed that the card was mainly for emergencies and basic necessities while she was in school,” he recalls.

Before Rotchin could remove his sister, another $800 in pending charges were added to the account. “Since she was an authorized user when those charges were made, I was responsible for paying them off, which I did over two months to avoid interest,” he says.

The removal process was emotionally draining, says Rotchin. “My sister and I have always been close. Having to make that call felt like a breach of trust in our relationship,” he says. “Even though the Chase representative was professional and quick, I felt guilty and anxious about how this would affect our relationship.”

Fortunately, removing his sister had no impact on his credit score. “It did affect hers though. It dropped about 30 points when the account was removed from her credit history,” he says.

Help others, but protect your credit

Adding an authorized user to your credit card can seem like a good thing to do to help friends and family. But if you’re not careful, you could be on the hook for any unpaid charges that your authorized user racks up on the card.

To protect yourself, check your credit card statement every month for any changes in spending on the authorized user’s card. Doing so allows you to be proactive if it’s necessary to cut someone off. Take advantage of AnnualCreditReport.com’s free weekly credit report to look for any suspicious activity. Also, keep track of your credit score regularly to watch for any potential drops.

Experian says it does not report late payments on the authorized user’s credit report. However, Equifax and TransUnion may report both positive and negative items for authorized users.

Despite what happened to him, Rotchin says he would allow another authorized user on his card — but with very different parameters, including:

• A clear written agreement about spending limits and acceptable purchases
• A monthly review of all charges
• Immediate notification for any purchase over $100
• Shared access to the card’s app for transparency
• A “three strikes” rule for unauthorized purchases

“The experience taught me that even with family, you need clear boundaries with finances,” said Rotchin.

Charbonier would also consider adding an authorized user on her card in the future — but with strict conditions. “I’d want a written agreement spelling out [use] terms and monthly spending limits,” she says. “There would be regular check-ins about charges, a clear repayment schedule and emergency-only usage rules in place.”

The bottom line

It’s crucial to monitor the spending habits of anyone you add as an authorized user, says Lafferty. “While it’s great to help out family or friends, sometimes financial boundaries need to be drawn for long-term stability,” he says. “Having clear communication about expectations and consequences before adding someone as an authorized user can help avoid these types of situations altogether.”