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If you think credit cards and childhood don't mix, you're not alone: Only about 10% of parents let their kids have a credit card, according to T. Rowe Price's latest annual survey. However, adding your child to your credit card account can help foster an understanding of finances and debt that could prepare them well for their financial future.
Kids can't open their own credit card account until they turn 18, and will need to prove independent income until they're 21. But even before then, minors can benefit from becoming authorized users on a family member's credit account. The right age to add your child as an authorized user depends on the reasons for doing so and whether your child is ready to manage the responsibility.
When It's Smart to Get a Credit Card for a Child Under 18
Before you imagine the potential pitfalls of an adolescent running amok armed with your credit card account at their disposal, let's take a look at the top five reasons you may want to consider letting your little one start swiping:
- Credit history: In general, most minors don't have a credit report or score yet; starting them with one now by adding them to your account can set them up for future financial opportunities. Your responsible credit usage can pave the way for better loan rates, approval for credit cards with generous rewards or even allow them to finance their first car without you cosigning.
- Safety: Credit cards offer more consumer protections than you can find with your typical debit card or cash. When it comes to purchase protection or defense against fraud, federal laws and credit card issuer policies make credit cards safer to use online and at the register.
- Education: When your kids learn to ride a bike, you can probably expect more skinned knees if they don't have you around to help them steer. Likewise, parental guidance with credit cards can help kids learn to manage credit, minimize the risk of credit damage and ward off bad habits. You can teach them the importance of paying balances on time, keeping credit utilization low and how to spend within their means. It's better that they get an early start learning about credit cards' often-steep annual percentage rates (APR) than learn the hard way how quickly debt and interest charges can build up down the road. Some issuers, like American Express, let you set lower credit limits for authorized users and track their spending so you can really stay on top of your child's charges.
- Emergencies: If your child has a cellphone, you've probably found some peace of mind knowing they can contact you in case of an emergency. With a credit card in their pocket, you can feel even more confident they won't get stranded without gas money or not have enough cash for lunch. It's wise to set rules on what exactly constitutes an emergency, and teach them to build their own emergency fund to immediately pay off any surprise expenses.
- Rewards: Though not exactly pertinent to your kids' finances, it can be a nice perk to earn extra on a rewards card via their spending. After all, your children are gaining invaluable financial education and credit history—more travel miles or cash back just makes the arrangement more valuable for you too.
How to Decide if Your Child Is Ready for a Credit Card
Before calling your credit card issuer and adding your kid to your account, determine if they're ready for the responsibility. Ask yourself these questions:
- Can they follow your rules? First and foremost, you'll want to know if you can expect them to abide by the limitations you put on their credit use. Figure out a few things in advance, such as whether they'll pay the bill themselves or reimburse you for their spending, where they can use their card and what they're allowed to buy. Determine the consequences for breaking your agreement, overspending or missing a payment. If your child isn't ready to meet your requirements (or breaches them when given the opportunity), it may be wise to wait a little longer.
- Do they understand credit cards? Your kids don't need to be financial geniuses to have a card with their name on it, but a basic understanding of interest rates, balances and credit limits is critical. Their past experience with cash and debit cards can be a good starting point as they adjust to being responsible with the additional spending power in their pocket. If they know how their actions can affect their credit (and yours) and why that's important, they may be ready.
- Is your credit ready? Authorized users can benefit from the primary account holder's credit history—but they have the potential to damage your credit if spending goes unchecked. An authorized user's excessive purchases can easily overburden the cardholder's finances, which risks increasing the account's credit utilization and potentially causing payments to be missed. In either case, your credit scores could be dragged down. If you're planning on a major financial move such as buying a home, you might prefer to avoid taking a chance on credit score damage.
Credit Card Age Requirements for Children
Some credit card issuers have their own age restrictions for adding minors to your account, along with a few other caveats. To help, we've compiled a list of the age restrictions for the major credit card issuers:
|Authorized-User Minimum Age Requirements by Issuer|
|Credit Card Issuer||Age Requirement|
|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||No minimum age requirement|
For the account to affect your children's credit, the issuer must report the authorized users to one or more of the three major credit bureaus (Experian, TransUnion and Equifax). Each company on the list above reports authorized users to the credit bureaus, but some issuers have limitations. For example, American Express does not report credit for authorized users under 18. Be aware of smaller banks that may not report to all three bureaus.
If the restrictions on your current account don't suit your family's needs, consider applying for a new card.
The Bottom Line
Credit cards require a great deal of responsibility, and not every child is ready for it right away. A mature tween may be in a better place to navigate a credit account than some high school seniors—or even some adults, for that matter. If you can lay the groundwork for a healthy relationship with credit early on, your kids (and their wallets) will thank you later.
You can also take the time to teach your kids about credit reports and credit scores, and the importance of keeping an eye on them. With free credit monitoring from Experian, you'll have access to your Experian credit report and your FICO® Score☉ 8 based on Experian data as well as a suite of tools that helps you maintain healthy credit.