More for Your Money: Trusting someone else with your credit card may prove rewarding

Sign-up bonuses worth tens of thousands of points and perks such as free checked bags or hotel elite status are great reasons to apply for travel-rewards credit cards. However, several credit cards also offer benefits to entice cardholders into adding authorized users to their accounts. Here is why it’s worth considering.

What is an authorized user? If you have a credit card, you can add other individuals to your account as authorized users. An authorized user receives a card in his or her name and can make purchases with it. However, authorized users cannot make changes to the account such as requesting higher credit limits or adding additional users.

They are also not responsible for paying off balances. That means the primary cardholder is on the hook for paying any balances accrued by their authorized users, and ultimately it is their credit score that is on the line. It’s imperative to authorize only additional users you trust and whose spending you can monitor before considering such an action.

So why do it in the first place? Doing so can help others, such as a dependent or spouse who might not have access to credit, to establish a credit history. Credit history counts for 15% of one’s credit score, and thus helps create or raise their overall credit score.

However, in recent years many credit-card issuers have added bonuses and other benefits for both the primary cardholder and authorized users to make the prospect more appealing.

Higher sign-up bonuses: Several credit cards currently or periodically offer bonuses for adding authorized users in addition to their usual sign-up bonuses. For example, the Chase Sapphire Preferred offers new cardholders 40,000 points for signing up and spending $4,000 within the first three months, plus 5,000 more points for adding an authorized user in the same time period. Authorized users can apply for the same credit card in their own right later on and still earn the sign-up bonus themselves.

More points: Just as the primary cardholder is responsible for paying off any balances accumulated by their authorized users, they also reap the rewards of that spending because points accrue to the primary account holder. This is why some small-business owners give employees cards so that their work-related spending accumulates points in the owner’s account.

Spending thresholds and incentives: Likewise, spending by authorized users also counts toward meeting the minimum-spending requirements for incentives such as sign-up bonuses as well as other monthly or calendar-year thresholds. That way, spending responsibly on more than one card can put more rewards within reach.

For example, the EveryDay Preferred Card from American Express awards cardholders with a 50% point bonus when they make 30 or more transactions per billing period. Those made by authorized users (for whom there are no fees to add) count toward that 30-transaction threshold. Even if you do not usually have that many transactions on a single card in a month, if you have another cardholder whose transactions count toward that number, it can put the 50% bonus within reach.

Richer benefits packages: Although authorized users of most credit cards are not entitled to the major benefits that the primary cardholder enjoys, there are some top-tier rewards credit cards that do offer a rich slate of benefits for additional cardholders.

The most notable is the Platinum Card from American Express. The primary card comes with a hefty $450 annual fee, but cardholders can order up to three additional cards for a total of $175. Just like the primary cardholder, additional users are entitled to benefits such as airport lounge access to Delta Sky Clubs (without guests), Priority Pass clubs and Amex’s Centurion Lounges. Additional cardholders are also eligible for Global Entry or TSA PreCheck application fee waivers (worth $100 and $85 respectively), free Boingo hotspot Wi-Fi access worldwide, as well as automatic Starwood and Hilton HHonors gold elite status.

The Citi/AAdvantage Executive World Elite MasterCard, also $450 per year, comes with Admirals Club membership for the primary cardholder, which would cost $400 to $500 for new members otherwise depending on their elite status with the airline. However, cardholders can also add up to 10 authorized users to their account for free, and each of them also gets Admirals Club access for themselves and up to two guests. The potential value is thousands of dollars.

Although there are risks to adding authorized users to your credit-card accounts, the incentives offered by some travel rewards cards make doing so for trusted individuals more than worth it.

travel@latimes.com