Authorized User/Co-Signer--Who Cares?

I come across a lot of people who have no idea what their legal and financial status is when they have a credit card or a loan with someone else. One mom let me know that she's working two jobs so she can pay her son's student loan which he can't pay. She co-signed the loan and doesn't want a negative account on her credit report and risk a lawsuit by not paying. Other women have told me that they are authorized users on their partner's credit card and wonder how that affects their credit.
Let's define the terms first:

Authorized User--someone who has permission to make charges on another person's credit card, but is not legally responsible for the debt.  Mint.com calls it "having a Credit card with training wheels". Pretty attractive for the authorized user. The primary account holder needs to exercise caution with this--if the authorized user makes a ton of purchases, the lender is looking to the Account holder to pay.

Co-Signer--Two people sign for a loan or credit card--both can make purchases/get the loan and both are legally responsible for the debt. If the primary person doesn't pay the debt, the co-signer will be the next person the lender comes to for payment (hence the mom working 2 jobs example above).

Information on the account is reported to the Credit Reporting Bureaus for all the parties involved--there is a myth out there that nothing is reported for the authorized user but that is incorrect. If fact, according to Experian, being an authorized user can help to build credit, if the account is in good standing (if the account is not and could harm an authorized users credit, they can have that account taken off).

It's important before you get into a legal and financial transaction with someone, that you are completely aware of what your risk is--what you will be responsible for--and how it could impact your credit rating. If you allow someone to be an authozied user on your credit card, be specific on the amount that person can spend, check your account often to ensure there aren't additional charges and be ready to take that person off the account if needed. If you co-sign with someone, make sure the payments on being made on time and be aware that you are at risk for the entire loan if that person bials on you.
For more information, see Bankrate.com article.