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As parents, we want the best start in life for our kids, which includes teaching them responsibility through a part-time job and encouraging them to excel in sports and extracurriculars. Some parents go one step further and open a custodial account for their kids, such as a UTMA/UGMA or a Roth IRA for kids, to help them get started with saving and investing.
Another simple thing you can do to give your kids a financial advantage is to add a child as an authorized user to your credit card. This will allow your child to build their credit history and score by leveraging yours. Upon reaching adulthood, they will then stand a better chance of being granted credit for other credit-related purposes, such as loans or mortgages, and for lucrative rewards credit cards.
That said, adding your child as a credit card authorized user isnt without risk. Heres how to decide if this strategy is a good fit for your family.
Building a strong credit history is crucial for financial success and it’s never too early to start. While your five-year-old might not be ready for a credit card of their own adding them as an authorized user to your account can give them a head start.
But is it the right move for you and your family? Let’s dive into the pros and cons of adding a young child as an authorized user so you can make an informed decision.
Benefits of Adding a Child as an Authorized User
There are several potential benefits to adding your child as an authorized user to your credit card:
- Building credit history early: This is the biggest advantage. By piggybacking on your good credit history, your child can start building their own credit score at a young age. This can give them a significant advantage when they apply for their own credit cards, loans, or mortgages in the future.
- Learning responsible credit use: Adding your child as an authorized user can be a valuable learning experience. You can teach them about responsible credit card use, including budgeting, tracking expenses, and making timely payments.
- Earning rewards: Many credit cards offer rewards programs that can benefit both the primary cardholder and authorized users. Your child can earn points, miles, or cash back on their purchases, which can be used for travel, merchandise, or even to help pay for college.
- Access to emergency funds: In an emergency, your child may need access to funds that they don’t have readily available. Having an authorized user credit card can provide them with a safety net in case of unexpected expenses.
Risks of Adding a Child as an Authorized User
While there are potential benefits, there are also some risks to consider:
- You are ultimately responsible for the charges: As the primary cardholder, you are responsible for all charges made on the account, even if they are made by your child. This means that you could be on the hook for any debts they incur, even if they were unintentional or unauthorized.
- It could negatively impact your credit score: If your child makes irresponsible charges or you miss payments on the account, it could negatively impact your credit score. This could make it more difficult for you to qualify for loans or other forms of credit in the future.
- It could encourage irresponsible spending: Giving your child access to a credit card could tempt them to overspend, especially if they don’t fully understand the consequences of their actions. This could lead to debt and financial problems down the road.
Making the Decision
Adding your child as an authorized user is a personal decision that should be carefully considered. There is no right or wrong answer, and the best choice for you will depend on your individual circumstances and your child’s maturity level.
Here are some factors to consider when making your decision:
- Your child’s age and maturity: Younger children may not be ready for the responsibility of using a credit card. It’s important to consider your child’s ability to understand and follow rules, as well as their financial literacy.
- Your spending habits: If you are prone to overspending or have difficulty managing your finances, it may not be a good idea to add your child as an authorized user.
- Your creditworthiness: Your credit score will be a factor in whether your child is approved as an authorized user. If you have a good credit score, it will be easier to get your child added to your account.
Tips for Adding Your Child as an Authorized User
If you decide to add your child as an authorized user, here are some tips to help ensure a positive experience:
- Set clear guidelines and expectations: Talk to your child about responsible credit card use and set clear rules about spending limits, authorized purchases, and payment responsibilities.
- Monitor their activity: Keep a close eye on your child’s spending and review their credit card statements regularly. This will help you identify any potential problems early on.
- Teach them about credit: Take the time to teach your child about credit scores, interest rates, and the importance of building good credit.
- Consider a secured credit card: If you are concerned about your child’s spending habits, you may want to consider getting them a secured credit card. This type of card requires a security deposit, which limits the amount of debt they can accumulate.
Making your child an authorized user can be a wonderful way to teach them responsible credit usage and to help them establish their credit history. However, before choosing a choice, it’s crucial to carefully consider the advantages and disadvantages. You can make sure that this experience is beneficial for both you and your child by heeding the advice provided above.
Access to funds in an emergency
Elderly children might not have the money on hand to pay for an urgent or unforeseen expense, such as when your teen’s car breaks down and you’re not there to help. It can be helpful to have a credit card in their own name, particularly if a retailer refuses to take a parent’s credit card number over the phone.
Adding a child as an authorized user can build their credit
A child can apply for their own card once they are no longer considered minors, but approval is not guaranteed. Even if the child has income, most rewards credit cards are out of reach without a credit history or score. While some issuers provide student credit cards with shorter credit history requirements, the rewards and spending limits are typically lower.
Some banks, like Chase and Citi, dont ask for an authorized users Social Security Number. However, credit bureaus can still match up the users date of birth and address with a credit file.
The majority of major credit card issuers will report the account to the three major credit bureaus when you add your child (or anyone else) as an authorized user; the account and its history will then typically appear on the user’s credit file. But some issuers won’t file a report until the child turns a specific age, and different bureaus have different guidelines about when to include accounts of authorized users on a report.
When your kids are finally able to apply for credit legally, adding them as authorized users could help them immensely—that is, if your own credit score and account history are good. However, keep in mind that you are responsible for any changes they make, and that any modifications to your account, whether favorable or unfavorable, may also affect your authorized users.
For these reasons, you should only add your child to accounts with a good payment history, preferably cards you’ve had open for a long time, if you’re making them an authorized user to help them establish credit with a credit card. The average age of accounts is one of the factors that determines credit score; therefore, a card that you have had open for a long time will be given more weight than one that you have opened recently.
Earn 5.00% on savings
- Check mark icon A check mark. It indicates a confirmation of your intended interaction. Available for users under 18.
- Check mark icon A check mark. It indicates a confirmation of your intended interaction. No minimum deposits.
- Check mark icon A check mark. It indicates a confirmation of your intended interaction. Reports payments to all three bureaus.
- Check mark icon A check mark. It indicates a confirmation of your intended interaction. No interest.
- Check mark icon A check mark. It indicates a confirmation of your intended interaction. Rewards on purchases.
- Check mark icon A check mark. It indicates a confirmation of your intended interaction. Early pay days.
- con icon Two crossed lines that form an X. No phone customer support.
- con icon Two crossed lines that form an X. Cannot deposit cash or checks into account.
- con icon Two crossed lines that form an X. Low ATM withdrawal limits.
- con icon Two crossed lines that form an X. No reported payments before customer turns 18.
Should You Make Your Child an Authorized User on Your Credit Card?
FAQ
Can a 5 year old build credit?
Can I put my 5 year old on my credit card?
Will adding my child to my credit card build their credit?
At what age can I add my child to my Discover credit card?
Can I add a child under 18 to a credit card?
You can add a child under the age of 18 to a credit card as an authorized user as long as the child meets any age restrictions set by the issuer. If your child is 18, then the field is wide open for adding them to your card. Here’s a breakdown of the top credit card issuers’ age requirements for authorized users: Credit card issuer
Should I add my child to my credit card?
If you’re looking to jump-start your kid’s credit history or track their spending, consider adding your child as an authorized user on your credit card. Becoming an authorized user has looser age requirements than if your kid opened their own card, since the minimum age to open a credit card as the primary account holder is 18.
What is the minimum age a child can use a credit card?
There is no legal minimum age for adding a child as an authorized user, however you should check your credit card issuer’s policies. Chase, for example, does not report the authorized user credit history of minors to the Credit Reporting Agencies. Other financial products like credit-builder loans have a minimum age of 18.
Can I add a minor to my credit card account?
The major credit card issuers allow you to add minors as authorized users, but several have minimum age limits. Most big banks will report authorized user accounts to the main credit bureaus, including the issuers listed below. Occasionally banks have even offered bonus rewards for adding authorized users, and some allow you to do it online.