Op-ed: My kids have credit cards and yours should, too

Personal finance

I remember my first credit card.

My parents added me to their Visa Gold card when I was around 13 years old. 

My mom specifically told me that it was for emergencies, or if I had permission beforehand to use it. She thought it was a way to help her daughter in case she needed money, but what she didn’t know then was that it also helped me learn how to handle credit early in life. 

Now, my three kids — ages 15, 12 and 10 — have had credit cards since before they entered kindergarten. 

They are far from alone. Six million American parents have at least one minor child with a credit card, according to a 2019 CreditCards.com poll

Children under 18 cannot apply for their own cards, but they can be added to their parents’ accounts as authorized users and be issued a card. Some banks, such as Chase and Citi, do not have a minimum age requirement for authorized users. Others, such as American Express, require authorized users to be at least 13 years old. 

Adding your child as an authorized user on your credit cards can be a smart way to set them up for financial success. Let’s talk about why it is a good idea.

Why your kid should be an authorized user

Adding your kids to your account allows them to make purchases with the card but you still are responsible for what they spend. While it may seem scary to give kids that kind of spending power, it actually helps them learn how to handle money responsibly while you still have oversight and can see what they are doing. 

I keep my kids’ credit cards safe and have shown my teen how to store his cards in his phone’s Apple Pay.

We pull my younger kids’ credit cards out at least once a year to help pay for their expenses such as school PTA donations, tutoring costs and teachers’ gifts. I even have them take their credit card to school to buy some items at the school book fair. 

This gives them a chance to use and practice smart spending and careful handling of their credit card. 

With your help, your child can pay off their spending balances each month and learn how quickly those small purchases add up. 

Giving your child a credit card should be a way to encourage conversations about money, setting spending priorities and budgeting. It may also help them begin to build their own credit history, so it will help them when applying for their own card or other type of credit in the future. Not all cards report activity to the credit bureau on authorized users who are minors.

And don’t forget that their spending will add to your credit card rewards. 

How to avoid authorized user pitfalls

Yes, when you make your child an authorized user with their own credit card, you will lose some control over your child’s spending and you will need to strike a balance between trust and oversight. If a kid misuses the card, you could be stuck with a big bill and even have your own credit rating hurt. 

Here is how to navigate those risks:

Set some ground rules and pay close attention: Make sure you are clear with your kids about what they can and cannot use the card for. Here are some topics to discuss: 

  • How much can they spend each month? 
  • What items are they allowed to buy and at which stores? 
  • Do they need to get your permission before each purchase? 
  • How will they pay off the balance at the end of each month?
  • How long will they remain authorized users?  
  • What are the consequences if they violate your rules? 

Open, early, comfortable money conversations can go a long way in building out a healthy relationship with money for you and your kids. 

Add your child, but keep hold of the card: Your children do not necessarily need to use the authorized user credit card or even have possession of it for it to build their credit history. You can add their names to a credit card account but hold onto the authorized user cards to prevent any mishaps. 

This strategy does not help them build good credit habits or provide access to funds in an emergency — it may only create credit profiles for them. 

Put guardrails in place: As a middle ground to help your child build good habits while limiting your exposure, you can have your credit card issuer set lower credit limits on the authorized user cards. 

— By Winnie Sun, co-founder and managing director of Irvine, California-based Sun Group Wealth Partners. She is also a member of the CNBC Financial Advisor Council.

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