What’s the difference between a co-signer and an authorized user?

One of the easiest ways to help a child or family member build credit history is by adding him or her as an authorized user on one of your credit cards.

This can establish a record for that person with the credit reporting agencies if he or she doesn't already have one, plus increase important credit score factors like the average age of accounts and overall credit utilization.

But being an authorized user isn't the same as being a co-signer on a credit card account. Here's what you need to know about the differences.

The difference between an authorized user and a co-signer

An authorized user is another person who is authorized to make charges to your credit card account. You'll receive a card in the mail with that person's name on it, but when that person uses the card, the charges will show up on your account — and you're also responsible for paying the bill.

A co-signer, on the other hand, is a shared responsibility. Just like co-signing for a student loan, the account would be opened in the name of your child or family member, but you are both equally responsible for any amounts charged to the card.

While the bank will generally only come to you for payment if the primary cardholder doesn't pay, it legally has the right to demand payment from you without asking the primary cardholder first.

Related: The credit cards with the greatest value for authorized users

Credit card issuers that allow co-signers

While federal law prohibits banks from issuing credit cards to anyone under 21 unless the person has a co-signer or enough income to pay off the card, most banks haven't chosen to allow co-signers on credit cards. No major card issuers allow co-signers on credit cards anymore.

However, you may be able to apply for a credit card with a co-signer at your local bank or credit union.

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Related: The benefits of adding a relative as an authorized user

Issues to consider before becoming a co-signer

In some ways, being a co-signer is a natural next step to help a child or family member build credit by opening an account that person is responsible for, rather than simply riding along on your account.

On the other hand, it's a bigger risk on your part — while it's fairly easy to place limits on an authorized user card or revoke access entirely, it's much harder to place restrictions on an account that partially belongs to someone else.

Being a co-signer is also a long-term commitment: By default, you'll be responsible for the card and have it show up on your credit report for as long as the account is open.

While some banks will remove a co-signer after certain conditions have been met (for example, once the primary account holder has established a good payment history and has sufficient income to support the card), your ability to remove yourself from the account without shutting it down depends on the bank's policies and discretion.

Co-signing for a card can also interfere with your own credit card applications when banks have restrictions that make approval for new cards conditional on how many accounts you've opened recently, such as Chase's 5/24 rule.

While we know it's possible to get around this requirement when authorized user accounts make you seem ineligible, convincing a representative that a co-signed card shouldn't count against you is likely to be more difficult.

Related: Have good credit? Share it with an authorized user

Bottom line

If you're trying to help someone boost their credit, being a co-signer for a credit card application can make a big difference. However, it's also a significant risk since you're then responsible for a credit card that you don't completely control.

In most cases, it's best to start by adding the other person as an authorized user on some of your cards — the person will get a credit score boost and enjoy some of the premium benefits your cards offer while you maintain full control of the accounts you're responsible for.

After he or she has proven the ability to handle your cards responsibly, you can consider being a co-signer if you can find an issuer that allows it and if the person still can't get a card without an assist.

Related: How to avoid and reduce credit card interest