Should You Add Your Child to Your Credit Card as an Authorized User?

Benefits of Adding Your Child as an Authorized User

If you’re thinking about putting your child on your credit card account as an authorized user, there are many benefits to consider:

• Build credit history. Adding your child as an authorized user can help establish their credit history. Once they’re added to the account (or once they turn 18, depending on the card issuer), the account’s entire history will be added to their credit reports. As long as you use the account responsibly and avoid high balances and missed payments, it can help them get started on the right foot.
• Teach them smart money habits. While you don’t have to allow your child to use the card they get as an authorized user, it can be a useful tool if you decide to do so. You can talk with them about limitations and credit habits and help them understand how their spending impacts their budget. You may even require that they pay for the purchases themselves to prepare for what it’ll be like to have a credit card of their own someday.
• Earn rewards. When an authorized user uses their card, you’ll earn rewards associated with those purchases. While your child likely won’t be spending a lot, a little cash back, points or miles here and there can add up.

Drawbacks of Adding Your Child as an Authorized User

While adding your child as an authorized user has some clear advantages for both you and your child, it doesn’t always work out for the best. Here are some potential pitfalls to watch out for:

• Poor account management can damage their credit. Being an authorized user can help your child build their credit history, but only as long as you keep the account balance relatively low and pay your bill on time every month. If you rack up a high balance, it could end up hurting their credit. If you find yourself carrying a high balance, it may be better to remove your child from the account so it will no longer impact their credit profile.
• You’re liable for the charges. If your child decides to go on a spending spree or can’t pay off the purchases they’ve made, you’ll be on the hook to pay them. Authorized users are not legally responsible for any charges they make on the card.

When Should You Add Your Child as an Authorized User?

While you can technically add your child as an authorized user at any time—as long as they meet the age requirements set by the card issuer—there are specific situations where it makes more sense.

For example, if your child is a teenager and needs gas money, adding them will likely be easier than handing over your card every time they need to fill up the tank. The teenage and college years can also be a good time to help your child develop good money management skills and start building their credit history.

However, it doesn’t make sense to add your child when they’re too young to understand how money works or you suspect they may use the account irresponsibly. You may also think twice if your credit card account has a high credit utilization rate.

How Old Do Credit Card Authorized Users Need to Be?

The minimum age requirement for authorized users varies among credit card companies. Here’s a quick summary of what to expect from the major card issuers:

If you have a credit card from a different issuer, call the number on the back of your card to learn about age requirements. Again, keep in mind that just because your child meets the minimum age requirement, it doesn’t mean they’re ready to become an authorized user.

Also, while some card issuers may allow you to add a child, they may not report their authorized user status to the credit bureaus until they reach the age of majority. For example, American Express allows authorized users at age 13, but it won’t begin reporting credit activity on the account until they turn 18. Contact the card issuer before you go through the process to learn about its policy.

How to Teach Your Kids About Money

Adding your child as an authorized user is just one way you can teach your child how to manage money. As you consider the right approach, here are some other tips that can help with the process:

• Involve your child in your budgeting process and teach them how to budget their own income.
• Demonstrate frugality in your own spending decisions.
• Talk openly about your own money mistakes and what you learned.
• Allow your kids to earn money through allowance, lemonade stands or other opportunities.
• Open a savings account for them and teach them the importance of saving for large purchases.