Helping Kids Build Credit as an Authorized User

You want your child to grow up as a responsible adult. You did all the right things raising him/her, or at least you think you did. But, did you teach your child about credit? Have you personally helped him/her build their credit?

Many parents miss this step. They think they cover personal finances well enough, but without practical experience, it’s often hard for kids to grasp the idea of credit and proper credit card use.

 If you want to start early, consider helping your child build credit by making him/her an authorized user on your credit card.

Age Doesn’t Matter

Each credit card has different requirements, but you’ll find many cards, such as American Express and Barclays that allow authorized users as young as 13-years old. Other cards, such as Discover and US Bank require children to be 15 and 16-years old respectively, and some cards, like Bank of America and Capital One don’t have a “minimum age requirement.’’

This opens many doors to help your child build a solid credit foundation.

Your Good Habits Benefit your Child

If you pay your credit card bills on time and keep your utilization rates (the amount of debt outstanding compared to your total credit line) low, you’ll help your child build a strong credit foundation.

If you incorporate lessons on proper credit card use and management, including payments, it’s an even better foundation for your child.

Allowing Use of the Card

Since your child is only an authorized user, you are responsible for all charges. This is important, because your credit card provider will ask you if they should send your child their own card in their name or not. Consider this carefully. You are not only helping your child to build their credit, but you are also using this time as a teaching opportunity to help them to grasp the financial lessons about proper credit card use.

If you do decide to have your credit card provider to issue them a card in their own name, allow use of the card, but with parameters. Whether you require your child to pay the balance of what he/she charged or ask permission before charging, it’s up to you. The key is to teach children to think before they swipe. 

If they use the card without permission or go over your allowed limit, have consequences ready. Before they enter the ‘real world’ they can learn the devastation of getting in over their head in credit card debt. It’s the perfect opportunity to teach them.

Things to Consider

Before adding your child as an authorized user, consider the following:

  • You are responsible for all charges whether you allowed them or not
  • Your credit card company may charge a fee to add an authorized user
  • Not all credit card companies report authorized users to the credit bureaus
  • If you miss a payment or charge too much, it can hurt your child’s credit score

Should you Make your Child an Authorized User?

If you have good credit and want to help your child get a solid foundation before heading out on his/her own, it’s a good idea.

Letting your child have a ‘dry run’ at owning a credit card helps him/her learn lessons before handling them on their own. Keep careful watch over the account, know your child’s habits, and use every opportunity – good or bad – to teach your child about credit cards, credit scores, and handling personal finances. 

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