Adding your child to your credit card as an authorized user can help establish their credit from an early age. But how does it all work?
When can you add a child to a credit card, what benefits are there to reap, and are there any potential drawbacks? If you have questions – we have answers!
So let’s take a closer look at when can you add a child to a credit and how it’s done.
What Is an Authorized User?
An authorized user is a person you add to a credit card account that is in your name. You will give the authorized user permission to make charges on your card. However, they are not responsible for any debt accrued on the credit card as the liability lies with you, the primary cardholder.
Typically, you can request to have someone added to your account as an authorized user by calling the credit card issuer.
If your account is open and in good standing, the card issue will be another credit card bearing the name of the authorized user. However, you can opt out of giving your children the card itself. That means you would hold onto the physical card, not the child.
By holding onto the card, your kids will still enjoy the credit-building benefits but won’t be able to make purchases.
Alternatives to Adding Children as Authorized Users
It’s important to note that adding your kids isn’t the only way to help them build credit or teach them financial responsibility.
One of the more popular alternatives is getting a secured credit card. It is a card that requires a security deposit from the cardholder once the account is opened. Typically, the deposit is refundable and will help determine the initial credit limit.
When it comes to secured cards, as well as credit cards, only those 18 or above can be primary account holders. However, if you want your kids to learn financial responsibility without going in the red, a secured card is something to think about.
Another step many parents take to teach children about finances is by taking out a small loan. A credit-building loan can help your child establish a credit history by making prompt payments. However, these types of loans typically have high interest rates.
The third alternative is downloading a financial app like BusyKid and giving them access to a spending card. With features like saving, investing, and donating, your kids are sure to pick up on some much-needed skills much easier. What’s more, the BusyKid Spend Card will give them spending freedom, while giving you control and insight.
Benefits of Adding a Child to a Credit Card
Before we get into the nitty gritty of when can you add a child to a credit card, let’s take a closer look at the benefits to reap when you add your child to your card.
Building Credit History
Adding a child as an authorized user can establish and build their credit history. Once you add your kids to your account or once they turn 18, the account issuer’s entire history will be added to the children’s credit reports.
As long as you, as the cardholder, are using the account responsibly and are avoiding high balances and missed payments, you can get your kids started off on the right foot.
When it comes time for them to apply for their own cards, they will have your card history to benefit from.
Teaching Smart Money Habits
A credit card is one of the most useful tools in teaching your children financial responsibility. When they become authorized users, they can make charges to the primary cardholder’s (your) card.
By having access to your card, they’ll be able to learn the importance of paying off charges each month.
Earning and Reaping Rewards
If you have a rewards credit card, you’ll earn rewards each time your child makes a purchase. These likely won’t be big purchases, but the rewards you can get from them are sure to add up over time.
Giving your child a credit card allows spending independence. Instead of having to ask you for money every time they want to make a purchase, they’ll be able to do it themselves. Of course, the flip side of that is that you lose some control over what your child is spending money on.
That said, with the proper financial guidance and education, you and your child will be able to navigate this much better.
Drawbacks of Adding a Child to a Credit Card
We can’t discuss when can you add a child to a credit card without going over the potential drawbacks of the decision. Here are some potential pitfalls to look out for.
Potential Damage to Credit
While it’s true that being an authorized user can help your child build credit, it only works if the account balance is relatively low and the bill is paid each month. However, if you rack up a high balance, you could potentially hurt your child’s credit.
If you find that a high balance is a consistent occurrence for you, you should consider removing your child from the account to avoid impacting their credit profile.
Liability for the Charges
If your child is an authorized user and decides to go on a spending spree or can’t pay off a purchase they’ve made – you’re responsible for them. Keep in mind that authorized users aren’t legally responsible for any charges made on the card.
When Can You Add a Child to a Credit Card?
Now, let’s answer the most important question of all – when can you add a child to a credit card?
Well, the truth is that the answer is going to depend on your credit card company. Some companies don’t have a minimum age for a child to be an authorized user. Others, however, have their minimum ages listed often at 13 or 15 years.
To find out what your credit card company’s requirements are, it’s always best to get it directly from the source. Call your credit card company to learn about their age requirements.
It’s also important to note that, while some card companies might allow you to add your child as an authorized user, they might not report the user status to the credit bureau until they reach the age of maturity.
You will find this to be the case with a company like American Express, for example. While they allow you to add your child as an authorized user when they turn 13, they won’t begin reporting credit activity until they turn 18.
When Should You Add a Child to a Credit Card?
Now that we’ve answered the big question of when can you add a child to a credit card, it’s time to look a bit closer. As many card companies don’t have a minimum age requirement, the question to ask is – when should you add your child to your credit card?
But the answer is once again going to be – it depends.
There is no such thing as the perfect age to become an authorized user. Ultimately, it’ll come down to responsibility and whether your child needs access to credit anytime soon.
While you’re debating whether to add your child to your card, a few questions to consider are:
- Can you trust your child to follow the rules you’ve set?
- How financially educated is your child?
- Do you want your child to have charging privileges?
- Is your child planning on applying for their own credit soon?
Things to Consider Before Adding a Child as an Authorized User
Whether or not you have made the final decision of adding a child as an authorized user to your credit card, there are a few things to consider.
First, you are responsible for all purchases made on the card, including the ones made by the authorized user. If you decide to give them the card, make sure they are mature enough to understand the cause and effect of swiping the card. If you’re not comfortable with giving them total spending freedom, you might be able to set spending limits for the authorized user but check with the bank issuer.
Also, some credit cards will charge an annual fee for adding authorized users. That can be a hefty fee, especially if you have a premium card.
Finally, most credit cards report authorized user activity to credit bureaus. However, some banks will only start reporting once your child turns 18. So before making your final decision, make sure to ask your credit card company if and when this information will be reported to credit bureaus.
Final Thoughts on When Can You Add a Child to a Credit Card
We hope to have answered your question of when can you add a child to a credit card. As you know by now, the answer is solely going to depend on the card issuer and their policies regarding authorized users.
If you feel like your kids could benefit from more financial education and responsibility before becoming authorized users – download BusyKid. The app and the debit card can help them learn how to manage money from an early age while giving them spending freedom.
Scan to download the BusyKid App!
* BusyKid Spend Card is issued by MVB Bank, Inc., Member FDIC, pursuant to a license from Visa®️ USA Inc. Cliq® is registered ISO/MSP of MVB Bank, Inc. All cardholders funds are insured by the FDIC in accordance with the FDIC’s applicable terms and conditions. For more information about your card terms and conditions including the VISA Zero Liability policy go here. Cliq®️️ is registered ISO/MSP of MVB Bank, Inc.