Should I get a credit card in my child’s name?
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Credit cards are generally considered financial tools for adults, but there are situations where it can make sense for a kid to have their own credit card. Note, however, that kids cannot open their own credit card account. Anyone under the age of 18 can only be added as an authorized user on an adult’s credit card account, which doesn’t come with the exact same privileges — or the liability.
With that being said, the short answer is yes. However, there are plenty of potential upsides and downsides to consider. Some of them depend on your unique situation and your kid’s personality, but you should consider each of the pros and cons and how they might apply to you before jumping in.
Benefits of giving your child a credit card
You may be wondering why you should get a child credit card in the first place, but there are plenty of potential benefits to consider:
While not all credit issuers report authorized user activity to the credit bureaus, there’s a good chance adding your child as an authorized user on your credit card could help them build a valuable credit history they’ll need later in life. Having some credit history under their belts can help young adults work toward qualifying for their first credit card as well as for student loans or even a mortgage over time.
Learn positive financial habits
Having a credit card of their own can help children learn that their actions have consequences. If they charge a purchase to their card, they’ll have to repay what they owe over time. And if they spend more than they planned, they’ll learn to understand that, eventually, the bill always comes due.
Credit for emergencies
Children with credit cards also have a valuable tool they can use in an emergency. A credit card for a child under 18 can be immensely helpful if, for example, your kid is away from home and needs supplies or your teenager needs to fill their car up with gas when they might otherwise run out.
Drawbacks of giving your child a credit card
There are plenty of reasons parents might consider adding a child to their credit card, but there are just as many “gotchas” to watch out for. Here are some to keep in mind:
Oversight is required
A child credit card might seem like a good idea, but it could create more work for you as well. Depending on the terms you set for their use of the card, you may need to keep track of their transactions on your account statement to figure out how much they owe you from their allowance, or perhaps just to discuss their spending habits.
Potential for problems
You’ll also have to deal with any problems that arise when your child or teenager has their own credit card, such as a kid running up a huge balance on something frivolous. If your child winds up being an overspender or is otherwise unwilling to make payments for unauthorized purchases, you could wind up dealing with all kinds of expensive issues.
You’re liable for repayment
Don’t forget that you’re ultimately responsible for repayment of all purchases charged to authorized user credit cards whether you approved them or not. This means you’re on the hook for your kid’s choices, both good and bad.
How to talk to your kids about financial responsibility
When it comes to helping your kids learn the ins-and-outs of credit, one of the most important factors for them to understand (and one that will hopefully stick for their entire lives) is this: Charging purchases to a credit card is easy, but you will ultimately have to pay every penny you charge back — plus any interest and fees.
That may be difficult for kids and teens to understand at first, but your credit card statement can be a valuable tool when it comes to providing a real-life example of this information. If your child charges a $40 game to their authorized user credit card, for example, having a paper bill that shows them the charge, the amount due and the due date can be incredibly eye-opening. If they only choose to make a minimum payment toward their charges, you could even use your statement to show them how interest accrued on the balance they carried from one month to the next.
Hopefully, kids and teens can learn over time that credit cards and budgets go hand-in-hand. It’s OK to charge purchases to a credit card if you’re able to set aside the money for repayment and stick with a plan. But if you charge “stuff” and don’t keep track or set money aside for your bill, using a credit card can make your life more costly and complicated in a hurry.
Minimum age requirements for a credit card
Some credit card issuers set a minimum age for authorized user credit cards, while others do not. We pored over the details from each card issuer so we could share these details.
|Credit card issuer||Minimum age for authorized users|
|American Express||13 years old|
|Bank of America||No minimum age requirement|
|Barclays||13 years old|
|Capital One||No minimum age requirement|
|Chase||No minimum age requirement|
|Citi||No minimum age requirement|
|Discover||15 years old|
|U.S. Bank||16 years old|
|Wells Fargo||18 years old|
How to get a credit card in your child’s name
If you decide to add your child as an authorized user to help them build credit or learn positive money habits, the process is fairly simple. Here’s what you need to do:
Step 1: Figure out which credit card account you want to share
Take stock of the credit cards you have and figure out which one you want to share. There may be benefits to adding an authorized user to a certain card — if you add your child to a rewards credit card or travel credit card, for example, you could earn points or miles for each dollar they charge to their card. On the other hand, choosing the card with the lowest interest rate might be prudent.
Step 2: Check to see if you can add authorized users online
Some credit card issuers let you add authorized users to your credit card accounts online, but you may also have to call into your issuer’s customer service number to start the process. Chase, for example, allows cardholders to add authorized users online to any of their credit accounts.
Step 3: Prepare yourself to offer some personal information for your child
Depending on the card issuer, you should plan on sharing information like your child’s Social Security number and date of birth when you request an authorized user card.
Step 4: Wait to receive your child’s new credit card in the mail
Once you add your child as an authorized user, all you have to do is wait for their credit card to arrive in the mail. Their card will have their own name on it, and you can activate it and start using it right away.
Alternatives to help your child build credit
If you want to help your child learn positive credit habits and you don’t want to get them their own credit card, giving them access to a debit card is one alternative. A debit card tied to their own bank account won’t build credit, but it can help them learn to budget the money they have and get them in the habit of tracking their spending.
Once your child is at least 18, you can also help them get their own starter credit card. This will likely need to be a student credit card or secured credit card geared to individuals with no credit or limited credit history, but any credit card is a good place to start. Here are our picks for the best student credit cards and the best secured credit cards.
Finally, you can also consider co-signing on an auto loan or another small loan with your child, even if you plan to pay it off right away. The loan and its repayment will be reported to the three credit bureaus, which can help your child begin building a history of responsible credit use.
The bottom line
Teaching kids the importance of credit is an essential part of gaining financial literacy. And while it can be overwhelming when you undoubtedly have a hundred other things to teach your little ones, taking the time to add your child as an authorized user (when the time is right) can help make the transition to a starter card much easier.