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Small Business

Alternative Lending Options: Finding the Top Non-Bank Business Loans

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Starting a business can be difficult. Finding funding for a business can be even harder. If you want to work with the best business financing companies, you’ll have to do some research, but it will be worth it.

Being in business can be stressful enough, so it’s a good idea to find a lender that is flexible, responsive and can offer the best terms and rates for the financial products you’ll need to support your business. Check out these twelve alternative lending options and discover which one best fits your financial situation.

Choosing the right alternative lending company

You’ll want to be very selective when considering alternative lending companies. Understanding the terms they offer is important so you are not locked into a deal that isn’t right for you or your business.

For example, if you are looking for equipment financing, but you are working with a lender that specializes in lines of credit, you may not get the best rates and terms available for your business. A lender that requires you to personally pledge assets is not a great fit for you if you don’t own anything to pledge.

Another consideration is working with a lender that understands your industry. The underwriting process is designed to mitigate risk for lending institutions. If they do not understand your business or industry, they may deem it risky.

Some things to consider when looking for the best alternative lending option:

  • Type of financing offered: This includes lines of credit, equipment financing, etc.
  • Terms: This includes interest rates, application fees, length of loans, etc.
  • Requirements: Personal credit score or amount of time in business
  • Speed: How quickly can a lender fund your loan?

The good news is that there are plenty of players, old and new, in the small business financing space. Once you understand your needs, you can get rates and terms from a few lenders and then choose the one that works best for you and your business.

OnDeck Capital

Loans offered: OnDeck Capital offers offers small business loans to U.S.-based companies. OnDeck Capital’s products include business loans, lines of credit and equipment financing.

Terms: OnDeck Capital’s short-term loans range from 3 to 12 months. Its long-term loans are from 15 to 36 months.

Fees: For the terms loan, there are origination fees based on whether you’ve gotten a loan from OnDeck before.

  • 1st loan: 2.5 to 4 percent of loan amount
  • 2nd loan: 1.25 to 3 percent of loan amount
  • 3rd+ loan: 0 to 3 percent of loan amount

The line of credit has a $20 monthly maintenance fee. The fee is waived for six months if you draw $5,000 or more in the first five days after opening your account.

Requirements: You must be in business at least one year and have over $100,000 in revenue over the last 12 months. A personal credit score of over 600 is required. Your business cannot be in one of the restricted industries OnDeck Capital will not lend to.

Time to funding: Loan funds can be disbursed as fast as one business day.

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CAN Capital

Loans offered: CAN Capital provides term loans and merchant cash advances.

Terms: Loan terms last from 6 to 18 months.

Fees: There is a 0.00% - 3.00% origination fee for term loans. MCAs have a $395 administrative fee.

Requirements: Term loans require a personal guarantee from the owner and more than six months in business. The business should have at least $150,000 in gross revenues. MCAs don’t require any collateral.

Time to funding: Funds can be in your account in as little as two days.

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Credibly

Loans offered: Credibly offers working capital loans, business expansion loans and MCAs.

Terms: Working capital loan terms are from 6 to 18 months. Business expansion loan terms are for 18 or 24 months.

Fees: For all loans, there is a one-time setup amount that is 0.00% - 2.50% percent of the loan or total cash advance.

Requirements: For the working capital loan and MCA, Credibly requires the applicant to have a FICO score of 500 or higher, more than six months in business and $15,000-plus in average monthly bank deposits. The business expansion loan requires applicants to have a FICO score of at least 600, more than three years in business and $15,000-plus in average monthly bank deposits along with $3,000-plus in average daily balances.

Time to funding: You can receive funds in your account as soon as the same day.

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All loans through Credibly are originated by WebBank, member FDIC.

National Funding

Loans offered: National Funding offers small business loans, along with equipment financing and leasing. For the small business loans, National Funding as a number of options:

Terms: Small business loans are for amounts between $5,000 and $500,000.

Fees: Information not available online.

Requirements: Small business loans require at least one year in business, $100,000 in annual gross sales and three months of bank statements. Equipment financing and leasing requires at least six months in business, a FICO score over 620 and an equipment quote from a vendor.

Time to funding: Funds can be received in as little as one day.

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Fora Financial

Loans offered: Fora Financial offers small business loans and MCAs.

Terms: The term on Fora Financial’s small business loans is up to 15 months. The MCA doesn’t have a set term.

Fees: Fees are based on individual and/or business credit profiles and determined at the time of approval.

Requirements: The small business loans requirements include: at least six months in business, $12,000 minimum in gross sales and no open bankruptcies.

Time to funding: You can receive funds in as little as 72 hours after your loan approval.

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The Business Backer

Loans offered: The Business Backer offers term loans, MCAs, lines of credit and SBA loans.

Terms: Terms will depend on the type of loan you choose:

  • Term loans for $5,000 to $350,000 have one- to three-year terms
  • MCAs for $5,000 to $200,000 have daily weekly or semi-monthly payments
  • Business lines of credit for $5,000 to $150,000 have one- to two-year terms
  • SBA loans from $3,000 to $350,000 have terms up to 10 years

Fees: Fees vary based on loan product.

Requirements: Businesses must have a minimum of one year in operation and $180,000 in annual gross revenue. Then you can begin the prequalification process for a loan.

Time to funding: Once you accept The Business Backer’s offer of funding, typical closing times are only a few business days.

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BlueVine

Loans offered: BlueVine offers invoice factoring and lines of credit.

Terms: Lines of credit for up to $250,000 can be paid back weekly over six or 12 months. Invoicing factoring limits can go as high as $5 million.

Fees: Fees are based on individual and/or credit profiles and determined at the time of approval.

Requirements: For the BlueVine line of credit, you’ll need a FICO score of 600 or higher, more than six months in business and at least $100,000 in revenue. For invoice factoring, you will need a FICO score of at least 530, more than three months in business and $100,000 in annual revenue. Your business must serve other business customers.

Time to funding: BlueVine responds to applications within 24 hours. For funding, you can choose between ACH electronic transfers or bank wire transfers. ACH transfers usually appear the next business day, but could take up to three days.

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Forward Financing

Loans offered: Forward Financing offers a variety of financing options up to $300,000 based on your business needs. To find out the products you are eligible for along with related rates, terms and fees, you must complete a loan application with Forward Financing.

Terms: Term varies based on business and product.

Fees: Fees vary based on business and product.

Requirements:

  • Owner’s name
  • Owner’s Social Security number
  • Business name
  • Business employer ID or tax ID
  • Recent bank statements for the business

Time to funding: Information not available online.

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Kabbage

Loans offered: Kabbage has several small business financing options of to $250,000. Unsecured loan products include:

  • Business lines of credit
  • Working capital loans
  • Online loans
  • Professional loans
  • Commercial loans
  • Short-term business loans
  • Inventory loans

Secured loan products include:

  • Equipment loans
  • Merchant cash advance
  • Factoring
  • SBA loans

Terms: Kabbage offers 6– and 12-month terms for its loan options.

Fees: Your fee rate will be between 8.00% and 24.00% of the principal loan amount and is determined based on your business performance factors.

Requirements: You must have at least one year in business and have at least $50,000 in annual revenue or $4,200 per month over the last three months.

Time to funding: Approval can take minutes. After that, once the loan agreement is signed, funds are sent to an account of your choosing. Loans deposited via a PayPal account can be in your account in minutes.
Loans deposited to your business checking account can take up to three days to process, depending on your bank. You may also withdraw funds using your Kabbage Card. The loan proceeds are issued immediately in this case.

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Reliant Funding

Loans offered: Reliant Funding offers short-term loans, MCAs and equipment loans.

Terms: Terms and rates depend on the loan type and your business credit profile.

Fees: Information not available online.

Requirements: Must be in business with current owner for at least one year and have at least $100,000 per year in revenue with no open bankruptcies.

Time to funding: Loans can be disbursed as soon as one day.

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Expansion Capital

Loans offered: Expansion Capital offers various small business loan products from $5,000 to $500,000. Amount and terms will vary based on individual business qualifications.

Terms: Loans are offered for 4 to 12 months.

Fees: Terms, fees and rates may vary by application. To find out the amount you qualify for, along with related terms, complete an application.

Requirements: Must be in business for more than six months, have a personal credit score of at least 500 and annual sales of at least $100,000. The business must not operate in any restricted categories set forth by Expansion Capital.

Time to funding: You can receive a quote on your loan within 24 hours. Money can be deposited in your account as little as two business days.

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Rapid Finance

Loans offered: Rapid Finance has lending products that cover: small business loans, SBA bridge loans, MCAs and lines of credit.

Terms: Small business loan terms are up to 60 months and funding amounts range from $5,000 to $1,000,000.

Fees: Fees will vary based on the product and your business credit profile.

Requirements: For small business loans and MCAs, you must be in business for two years or longer and have monthly revenue of at $5,000 or more.

Time to funding: You can receive funds in as little as one day.

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Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Aja McClanahan
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Aja McClanahan is a writer at MagnifyMoney. You can email Aja here

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Small Business

SBA Startup Loans – Your Top Options in 2019

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

SBA startup loan
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If you are looking for funding for your new business, you may have considered a U.S. Small Business Administration startup loan. There are many funding options to choose from, so you want to make sure that you do your research to find the option that works best for your business. Here are some tips, guidelines and things to consider in your research for an SBA startup loan.

The cost of starting a business

Determining how much money you need to start your business can take time. It will depend on your business model and what industry your business is in. Here are some things to consider so you can plan for how much startup financing you might need.

Initial fees

One of your first expenses will likely entail creating a legal structure for your business, and you may also need to pay to file articles of incorporation with your state. Even if you don’t plan on incorporating your business, you may require federal or state licensing and permits, which aren’t free, either.

Office space

Whether you need an entire store to set up shop or a single office, you’ll need to add the cost of renting or buying space to operate your business. If possible, consider starting the business from your home to reduce your overhead in the beginning, just make sure you’re following any community or neighborhood rules. You can read more about how to run a business from home without breaking any rules on LendingTree. MagnifyMoney is a subsidiary of LendingTree.

Equipment and inventory

Every business needs startup equipment, even if you’re a one-person operation. Needs vary by industry and may include vehicles, computers, machines or furniture. The costs of inventory are all across the board, too. If you’re opening a business in retail, wholesale or distribution, you’ll need to calculate inventory costs upfront.

Advertising

You won’t get many customers if no one knows you exist, so it’s pretty important to add marketing and advertising costs to your business budget. You may want signs, banners or business cards to promote your business, along with a well-designed website. With more than half of small businesses reportedly operating without a website, having one will give you an instant advantage.

For other startup costs, you could use the SBA’s startup costs worksheet to provide a better understanding of how much capital you’ll need for your startup financing.

How to secure an SBA startup loan

Not only does the SBA offer tools to help you plan your startup costs, it also offers training programs and education to grow your business, too. As you navigate the seemingly endless list of expenses you’ll need to cover to get your business off the ground, the SBA can help.

Jessica Mayle, district public affairs specialist at the SBA’s Illinois office, said, “Before seeking a loan, a small business owner should make sure he or she has a solid business plan, financial projections, collateral and other necessary materials. Working with a counselor from a Small Business Development Center or SCORE can help increase your chances of success.”

Though definite requirements vary by type of small business loan, here are a few general guidelines your business must meet:

  • You’ve exhausted all other private financing options.
  • You’re considered a small business.
  • You’ve been in operation more than two years.
  • You have a good personal credit score.
  • You have had no bankruptcies or foreclosures in the past three years.
  • You’re prepared to use personal assets as collateral to guarantee your loan.

Additionally, if you don’t already have a solid business plan in place, now is the time to create one. A detailed business plan that includes financial forecasts and statements is a requirement for any startup financing, including SBA loans.

The best SBA startup loans for 2019

SBA loans can be helpful for any business looking for startup financing. Through its partnerships with lending institutions like banks, microlenders and community organizations, the SBA can connect you with its best lenders for your small business.

Depending on what you want to use your SBA loan for and how much startup financing you need, there are a few options to consider.

SBA 7(a) Loans

As the most common type of SBA loan, these go up to $5 million and are used for almost any business purpose. SBA 7(a) loans add anywhere from 2.2 to 4.75% to a lender’s base rate and loans can be repaid from 10 to 25 years, depending on the purpose of the loan.

Minimum requirements:

  • Must be a for-profit business
  • Meets SBA size standards
  • Shows good character, credit and management; and the ability to repay
  • Must be an eligible type of business

Used for:

  • Funding startup costs
  • Purchasing equipment
  • Purchasing new land (including construction costs)
  • Repairing existing capital
  • Purchasing or expanding an existing business
  • Refinancing existing debt
  • Purchasing machinery, furniture, fixtures, supplies or materials

Two popular loans frequently accessed as part of the 7(a) loan program are the SBA Express Loan and the SBA Advantage Loan. With the Express Loan Program, your borrowing is capped at $350,000 but processing time is expedited for a quicker approval.

Advantage Loans are geared toward businesses that might not qualify for the standard 7(a) loan because of low revenues or other reasons. Though it does offer the same expedited service, the Advantage Loan limits lending to $250,000.

SBA 504 Loans

With a specific focus on small businesses looking to buy or build commercial real estate, the SBA 504 loans provide up to $5.5 million in financing. The SBA also facilitates the partnering of banks with a community development corporation (CDC) to cover the cost of funding the loan.

Requirements:

  • Alternative Size Standard: For-profit businesses that do not exceed $15 million in tangible net worth
  • Cannot have an average of two full fiscal years’ net income over $5 million
  • Owner-occupied 51% for existing or 60% for new construction

Used for:

  • Purchasing machinery and equipment
  • Fixtures, leasehold improvements
  • Working capital

This loan cannot be used to repay existing debt.

SBA CAPLines

If your business needs help with recurring payments or an unexpected expense, the CAPLines Program has five line-of-credit products designed for different goals and provides up to $5 million in financing.

The repayment term can be from five to 10 years.

Requirements:

  • Must be a for-profit business
  • Meets SBA size standards
  • Shows good character, credit and management; and the ability to repay
  • Must be an eligible type of business.

Used for:

  • Financing seasonal and/or short-term working capital needs
  • Cost to perform
  • Construction costs
  • Advances against existing inventory and receivables
  • Consolidation of short-term debts

Not sure which of the five programs are right for you?

Here’s a quick overview:

  1. Seasonal Line of Credit: Covers seasonal increases in inventory needs, labor costs or accounts receivable.
  2. Contract Line of Credit: Used for materials and labor needed for assignable contracts.
  3. Builders Line of Credit: Designed for contractors that build or renovate residential or commercial buildings.
  4. Standard Asset-Based Line of Credit: Allows small businesses to convert short-term assets, such as outstanding invoices, to cash.
  5. Small Asset Based CAPLines: Revolving Line of Credit to finance short-term working capital needs of the borrower.

SBA Export Loans

For global-business seekers, the SBA Export Loan provides funding to expand exports, participate in international transactions and enter new foreign markets. Repayment terms extend up to 25 years.

Requirements:

  • Must be a for-profit business
  • Meets SBA size standards
  • Shows good character, credit and management; and the ability to repay
  • Must be an eligible type of business
  • Engaged in or preparing to engage in international trade
  • Adversely affected by competition from imports

Used for:

  • Permanent working capital
  • Equipment
  • Facilities
  • Land and buildings
  • Debt refinance related to international trade

If you’re seeking a quicker funding opportunity, the SBA Export Express Loan is another option, though you’re limited to $500,000 in financing. There’s also the SBA Export Working Capital Loan that allows up to $5 million to help cover the costs associated with entering a new export marketing or expand in an existing one.

SBA Microloans

While most loans are geared toward for-profit businesses, SBA Microloans are specifically designed to provide loans to nonprofit intermediaries who then lend amounts of less than $50,000 to for-profit small businesses and nonprofit child care centers. You’ll have up to six years to repay a microloan .

Requirements:

  • Must be a for-profit business
  • Meets SBA size standards
  • Shows good character, credit and management; and the ability to repay
  • Must be an eligible type of business

SBA Disaster Loans

When natural or human-made disasters strike, small businesses can suffer immensely. The SBA Disaster Loans offer financial help for businesses to recover from a declared disaster.

Depending on the type of emergency, there are three types of loans to choose from:

  • Physical Disaster Loans
  • Economic Injury Disaster Loans
  • Military Reservists Economic Injury Loans

Borrowing through this program gives you access to as much as $2 million, with a repayment period of up to 30 years. The interest rates of 4 to 8 percent are quite reasonable, too.

Requirements:

  • Business must have suffered damage from a physical or economic disaster
  • Military Reservist loans are offered when essential employees are called to active duty

Used for repairs/replacement of:

  • Real property
  • Machinery
  • Equipment
  • Fixtures
  • Inventory
  • Leasehold improvements

Finding the right SBA loan for your small business

Determining how much funding you need and what type of SBA loan you should apply for is a tedious and time-consuming task.

Your local SBA District Office can help with personalized one-on-one guidance to calculate your startup financing needs and to select the right loan program. Finding the right SBA loan will push you through the difficult first few years to grow into a well-established and successful small business.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Aja McClanahan
Aja McClanahan |

Aja McClanahan is a writer at MagnifyMoney. You can email Aja here

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Building Credit, Credit Cards

Guide to Adding an Authorized User to Your Credit Card

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication. This site may be compensated through a credit card partnership.

Disclaimer: Though we have done our best to research information regarding this topic, be aware that issuing banks may have unique rules and agreement terms that apply to their particular credit card accounts. Contact issuing banks directly for questions on terms and policies relevant to specific credit card accounts.

What is an Authorized User?

An authorized user on a credit card account is any person you allow to access your credit card account. Not to be confused with a joint account holder, an authorized user can only make purchases and, in some cases, have access to certain card benefits and perks. Joint account holdership is becoming extremely rare, but typically occurs when two people apply for a credit card together. In joint account ownership, both people are liable for charges and can access and make changes to a credit card account.

An authorized user can be a spouse, relative, or employee. When you designate an authorized user on your credit card account, this person usually gets a card bearing their name with the same credit card number as the primary cardholder. In this scenario, the primary cardholder is liable for all transactions made by themselves as well as by any authorized user tied to their account.

Why Would You Add an Authorized User to Your Credit Card Account?

There are many reasons you might think about designating an authorized user for your credit card account. It all comes down to convenience and extending benefits that a credit account offers: access to credit, related perks, and credit card rewards, as well as the potential to improve the credit score of the authorized user.

For example, couples that share expenses might find it easier to designate one or the other as an authorized user to avoid passing a single card back and forth to make purchases. Perhaps you have a relative who lives far away, and it would be easier to give them access to your credit account for emergency purchases. You may also have a child that you want to assist in building credit history to increase their credit score. Adding them as an authorized user could help with this, but we’ll cover that more in another section.

Additionally, if you are an employer whose employees need to make purchases on behalf of the company, it would make sense to make them an authorized user. Without this designation, it could be extremely inconvenient for them to not have a company credit card at their disposal.

In some cases, adding an authorized user can also accrue reward points connected to a credit card account. These reward points can be used to make purchases or receive discounted pricing on things like travel and retail products. Typically, points are accrued from reaching credit card spending amounts within a certain time frame. Sometimes, the act of adding an authorized user can garner additional rewards as well.

How Can I Add an Authorized User to My Credit Card Account?

Credit Card Issuer

Age Requirement

American Express

13 or 15 years old, depending on the card

Barclays

13 years old

Bank of America

No minimum age requirement

Capital One

No minimum age requirement

Chase

No minimum age requirement

Citi

No minimum age requirement

Discover

15 years old

U.S. Bank

16 years old

Wells Fargo

No minimum age requirement

As the primary cardholder you are the only person who can designate an authorized user. The authorized user cannot contact the credit card issuer and add themselves to your account. You will have to contact the issuing bank and request to add one or more authorized users to your account.

Depending on the bank and the technology in place, you may be able to handle this process entirely online. Some banks allow you to log in to your banking portal to designate additional authorized users, create their own bank login and profile as well as determine the level of access you’d like them to have to your account. Levels of access can range from being able to view transactions only to making purchases. If your bank doesn’t have this technology in place, usually a phone call is sufficient.

Adding Authorized Users Online

How to Add an Authorized User to a Chase Credit Card Account:

  1. Log into your Chase credit card account
  2. Under “My Accounts” click “Add Authorized User”
  3. Complete the information requested (see screenshot below for reference)How to Add an Authorized User to a Chase Credit Card Account

How to Add an Authorized User to a Bank of America Account:

  1. Log onto your Bank of America account.
  2. Select the credit card you’d like to change.
  3. Click on the tab labeled ‘Information & Services’
  4. Scroll down to the section labeled “Services”
  5. Click on “Add an authorized user”

How to Add an Authorized User to a Chase Credit Card Account

screen shot 2

How to Add an Authorized User to a Capital One account:

  1. Log onto your Capital One credit card account online.
  2. Under the “Services” tab, click “Manage Authorized Users”
  3. Click “Add New User”

screen shot 6
screen shot 7

How to Add an Authorized User to a American Express credit card account:

  1. Log onto your Amex account online.
  2. Click on “Account services”
  3. From the lefthand menu, select “Card Management”
  4. Under “Account Managers”, click “Add and Manage Users with Account Manager”screen shot 10
    screen shot 11

How to Add an Authorized User to a Citi credit card account:

1. Log onto your Citi credit card account online.
2. Select the “Account Management” tab.
3. Click “Services” from the lefthand menu.
4. Click “Authorized Users”
5. Click “Add an authorized user”
6. Fill in the authorized user’s personal information.

 

screen shot 14

 

 

screen shot 12

How to Add an Authorized User to a Barclays credit card account:

  1. Log onto your Barclays credit card account.
  2. Select the “services” tab.
  3. Under the dropdown menu, select “Authorized users”
  4. Select “Add an authorized user”
  5. Complete the form to add an authorized user.
    screen shot 17screen shot 18screen shot 20

Who Can Be an Authorized User on My Account?

An authorized user can be anyone you choose, whether they are related to you in some way or not. In most cases, the bank will request identifying information such as name, birthdate, Social Security number, and address. Some card issuers require that authorized users meet age requirements, and others do not have age requirements. As always, check with the bank to understand the criteria authorized users must meet for your card.

The Fees

Some credit cards will charge an additional fee for more additional authorized users, while others will offer this benefit at no charge. Make sure you read the fine print in your cardholder agreement so that you are aware of all the fees associated with having one or more authorized users on your account.

Fees can range from less than $100 to a few hundred dollars and beyond each year. Business accounts especially can carry higher fees when multiple authorized users are associated to one account.

Liability

As the primary account holder, you must understand that you are 100% solely liable for any and all charges made on your account by both yourself and your authorized user. If you have been designated as an authorized user, you do not legally share liability for purchases made on the credit card account. However, you may have a personal arrangement with the primary account holder to pay your share of charges when the bill is due.

What Can an Authorized User Do?

This can depend on the level of access you’ve chosen with your card issuer for your authorized user. If there are not varying levels of access to choose from, check with the card issuer to find out exactly what an authorized user can and cannot do.

In most cases, an authorized user cannot make changes to an account. They cannot close an account, request changes in bill due dates, change account information, or request limit increases or a lower annual percentage rate.

Again, this varies from card issuer to card issuer, but there are many other things an authorized user can do.

Here are some possible capabilities based on the terms of your credit card issuer:

  • Make purchases
  • Report any lost or stolen cards
  • Obtain account information
  • Initiate billing disputes
  • Request statement copies
  • Make payments and inquire about fees

Benefits of Adding an Authorized User

As mentioned before, adding an authorized user to a card can be for convenience, accruing rewards, or sharing card perks and benefits. An authorized user can be incredibly convenient in the case that you don’t have your personal card or for some reason don’t have immediate access to it.

Having an authorized user can help a primary user reach limits to earn reward points for some cards. One of the most effective marketing strategies of credit card companies is to offer bonuses and rewards for adding authorized users to your account. Adding another user to your account could add a few thousand extra reward points you would not have earned without adding the user. Then, there’s always the chance that the authorized user will make purchases that contribute even more to your attempt to accrue reward points.

Finally, there are a number of credit cards that offer perks or benefits that can extend to your authorized users. Depending on your credit card, benefits like car rental insurance, lost luggage reimbursement, and extended warranties could apply to all purchases made, including those by your authorized users, on your credit card account.

Benefits of Becoming an Authorized User

Though the credit-reporting landscape is changing, there’s still the potential to “piggyback” on a primary account holder’s credit history for a card in good standing. But not all credit card companies report information to credit bureaus for authorized users in all circumstances. However, to know for sure what will be reported to the credit bureaus in regard to your authorized user status, speak with your card issuer for the details of what information is reported and when to credit bureaus.

Another benefit is having access to more credit. If you are in a bind and have emergencies that come up, access to credit can be helpful. Plus, exercising diligence in managing purchases and bill payment can help you develop good credit habits.

You should also know that being an authorized user may grant you access to certain perks for account holders and their primary users. There are benefits like access to travel lounges, Global Entry or TSA PreCheck application, travel credits, and discounts an authorized user could be privy to as well.

What Could Go Wrong?

If for some reason the credit card account doesn’t remain in good standing, the credit score of both the primary account holder and the authorized user could be affected. If you are a primary account holder, make sure your authorized user understands the terms under which they can make purchases. If they make purchases that cause your payments to be delinquent, your credit score could suffer.

Even if you did not give this person permission to make purchases with your credit card account, the fact that you designated them as an authorized user is evidence that you at some point trusted them with your credit card access. A claim of criminal or fraudulent activity in this instance would be extremely difficult to prove, so choose your authorized users wisely.

Though not as common with an authorized user, your credit score could be negatively affected if an account becomes delinquent. Because tradeline reporting for authorized user accounts to credit bureaus varies from card to card and scenario to scenario, a delinquent account status could still appear on your credit report. If you will be added to someone’s account as an authorized user, find out whether or not the credit history of the account will be reported to credit bureaus under your authorized user status.

Removing an Authorized User from an Account

Either the primary cardholder or the authorized user can remove an authorized user from an account by contacting the credit card issuer. You may be asked to verify your information as well as the information of the primary account holder.

In many cases, only one card number is issued between one or more users. Your credit card company may deactivate the primary cardholder’s credit card number and reissue a new card and number once an authorized user is removed from an account.

If your status as an authorized user does show up on your credit report for the credit account after you’ve been removed from a credit card account, you may have to contact credit bureaus to have it removed.

The Best Way to Manage Shared Credit Access

Designating someone as an authorized user is not something to be taken lightly. Even a small misunderstanding of credit card issuer terms and your own interpersonal credit arrangement can cause problems. Before adding an authorized user to your account, set ground rules around card use that covers access to perks and making purchases.

Some things to consider and discuss with your authorized user include:

  • What is the goal in having the authorized user on the account?
  • Will the authorized user have a physical card?
  • When is it OK to use or not use the credit card to make purchases or access card perks?
  • The credit history of both the primary cardholder and the authorized user
  • Good credit habits that will prevent identity theft and fraud
  • Setting up monitoring alerts with the credit card company or an identity theft protection service

The ability to add an authorized user to a credit card account can be a double-edged sword. On one hand, convenient benefits of access to credit and credit card perks can make life easier in so many ways.

On the other hand, this same convenience can cause problems if both the primary cardholder and the authorized user don’t understand the rules of engagement with each other or the terms set forth by the credit card company.

Adding an authorized user to your account has the potential to be incredibly convenient and mutually beneficial if handled the right way. Make sure you follow best practices to get the most out of this financial arrangement.

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Aja McClanahan
Aja McClanahan |

Aja McClanahan is a writer at MagnifyMoney. You can email Aja here

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