What Is a Primary Account Holder?
The term primary account holder refers to the main user of an account such as a credit card, bank account, or loan. This is the person who is legally responsible for the debt, along with the maintenance of the account. This individual can also make changes on the account, including issuing access and/or cards to other authorized users.
Key Takeaways
- A primary account holder refers to the main user of an account, such as a bank or credit card account.
- Primary account holders are legally responsible for the account.
- Primary account holders can name others as "authorized users" on the account, but they remain responsible for it.
- Joint account holders share responsibility for that account and both are considered primary account holders.
How Being a Primary Account Holder Works
The person who applied to open a bank account or sign up for a credit card is referred to as the primary account holder. The financial institution uses their financial profile in order to approve (or not approve) the account.
With most financial accounts, the primary account holder has the option to give authorized users access to the account. Those are known as secondary account holders and, in the case of credit cards, also called additional cardholders. The primary account holder is still liable for all charges on the account, including transactions made by both the primary account holder and any authorized users.
Examples of Primary Account Holders
Two of the most common types of financial accounts that have primary account holders are checking accounts and credit cards. Here is how they work for the primary account holder:
Checking Accounts
Opening a checking account is usually a relatively simple process. The financial institution will, however, request certain personal information from the primary account holder, including their full name, address, and Social Security number.
A primary account holder who's approved for a checking account will typically receive a debit card and a batch of personal checks to give them access to the money in the account. Primary account holders have the option of adding an authorized user to the account and having the bank provide them with their own debit card.
As mentioned, the primary account holder is responsible for the account and paying any fees that it may incur, such as overdraft fees. By law, however, the account holder's liability is limited. For example, if their debit card is lost or stolen, their liability is limited to $50 if they report the loss or theft within two business days of discovering it. Their liability rises to $500 for the next 60 calendar days, and if they fail to report it during that period they may be liable for all of the money in their account plus any linked accounts.
Credit Cards
The primary account holder of a credit card is typically the person whose name is on it. When they apply for a credit card, the issuing bank will generally check their credit reports and credit score to make sure they are a good risk. That information can also affect the interest rate the card holder will have to pay if they're approved. The stronger their credit, the lower the interest rate and the larger the credit limit they may be approved for.
The primary account holder may request that the credit card company issue additional cards to authorized users, such as family members. The lender ordinarily won't check on the authorized users' credit histories, but it may report their activity with the card to the credit bureaus. This can be a good thing for authorized users who are trying to build a credit history in order to qualify for a card on their own.
However, the primary account holder remains responsible for all of the debt on the card. For that reason, primary card holders should be careful in who they allow to become authorized users on their card. Another option for someone with little or no credit history is to get someone else to cosign on the account, although most credit card issuers no longer allow this.
As with checking accounts, primary account holders' liability is limited by law. If, for example, their credit card is lost or stolen, their maximum liability is $50. If their account number is stolen, but not the physical card, their liability is $0.
Primary Account Holder vs. Secondary Account Holder
Authorized users are also known as secondary account holders. As such, they may be limited in their access to the account. This is especially common with business accounts, where a secondary holder may be authorized to make deposits into the account but not to withdraw money from it.
In most cases, the secondary account holder has no legal responsibility for the account. This means the institution cannot go after them in the event of non-payment or other problems, even if they are the ones responsible.
Primary Account Holder vs. Joint Account Holder
Many financial institutions offer joint accounts to their consumers. These accounts allow two individuals to be considered primary account holders. Joint accounts are common for married couples or family members, such as a parent and a child.
Either individual can also add authorized users to the account. Both joint account holders share the responsibility for all charges made by each other and by any authorized users.
What Is a Cosigner?
A cosigner is someone who agrees to be responsible should another person default on a loan or other debt. This is rare with credit cards today but still common with other types of borrowing and contracts like apartment leases. Unlike a primary account holder who allows someone to become an authorized user on their account, a cosigner typically doesn't use the account themselves, even though they are still liable for it. Any missed payments on the account can also have a negative impact on the cosigner's credit.
Do Mortgages Have Primary Account Holders?
A person who takes out a mortgage is often referred to simply as the borrower or, more formally, as the mortgagor. In the case of a joint mortgage, more than one person, such as a married couple or a parent and their child, will be legally responsible for the loan.
Will Having an Authorized User on a Checking Account Affect Your Credit?
No, unlike credit cards, bank account transactions aren't included on credit reports, so they don't affect your credit one way or another.
The Bottom Line
Being a primary account holder means that the account and any liabilities it incurs are yours and yours alone. You can add authorized users to the account if you wish, but the liability still rests with you.
