Should You Add Your Child as an Authorized User on a Credit Card?
Being an authorized user is an option, but it doesn’t guarantee improved credit for your child.
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As parents, we want the best for our children: health, happiness — and good credit. Having a strong credit profile can determine whether your kid gets approved for a loan or how much they’ll pay for car insurance when they’re grown. But establishing credit for someone with no credit history is challenging.
A common workaround is for parents to add their children as authorized users on their credit card accounts. However, this arrangement isn’t always the right move. First, learn about the potential limitations of adding your kid as an authorized user and alternative ways they can build credit.
An authorized user is someone who can use the primary person’s credit card but isn’t legally responsible for paying the bill. It doesn't have the same credit-building power as being the primary user on an account, but it's one option. Credit checks aren’t required, and the user can quickly piggyback on the primary cardholder’s credit history.
Can kids build credit — and at what age?
If you’re hoping to boost your child’s credit before they even learn to tell time, you could face roadblocks. Your kid may not qualify for authorized user status. While some card issuers don’t have age restrictions, others require a minimum age of 13 to become an authorized user on a credit card.
Even if you can add your child, the issuer may not report their account details to the credit bureaus — or some might only report credit information for those age 18 and older. If the credit bureaus don’t get their information, no credit score is calculated in their name, defeating the purpose of adding them as an authorized user in the first place.
To get more clarity about your specific situation, ask your credit card company how authorized user arrangements work.
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Does adding a child to a credit card have risks?
Yes, says Bruce McClary, senior vice president of membership and communications at the National Foundation for Credit Counseling.
“Same as the primary account holder, it can affect your credit positively or negatively, depending on how the card is used,” McClary says.
Being an authorized user doesn’t guarantee improved credit. If you have a record of on-time payments and don’t use too much available credit, that can generate or help your kid’s credit score. But your credit and your child’s can suffer if either person uses the account unfavorably.
Ultimately, it’s up to the parent to keep the account in good standing.
Does your child need the card to build credit?
No, you don’t need to give your kid the credit card for them to benefit. As long as the primary cardholder keeps their account open and active, the authorized user’s credit will share the effects.
If you do give your child the card, set some ground rules:
- Talk about when it's OK to use the card, like emergency situations or for essential needs.
- Discuss how much they're allowed to spend and on what kinds of purchases. Some credit card companies let you place spending limits for authorized users, so that might help guide your conversation.
- Make clear who will make the payments. If you want them to help pay for their purchases, give them a deadline.
Even if your child doesn't make purchases, adding them as an authorized user could be a way to teach them about how credit works.
» Want to remove your child as an authorized user? Here’s how.
Maybe, but maybe not. Some lenders don't take authorized user accounts into consideration when reviewing credit applications or give them much weight.
“If you're a lender and you're looking at someone and you see the designation that they're an authorized user rather than the primary account holder, it's just telling you that this person did not have to go through a credit approval process to have access to that account,” McClary says.
Having an account in their own name puts your kid in a stronger position because it shows they’re equipped to manage payments. You can guide them toward opportunities in adulthood.
When authorized user status isn’t enough for lenders, your child still has options.
“There are credit-builder loans that are available. There are starter credit cards for young adult consumers, where the threshold for approval is a little bit lower. You can also look at options for secured credit cards that require no credit check, but they require a good faith deposit in order to open the account,” McClary says.
Co-signing your kid’s car or student loan can also help build their credit as they make on-time payments, but as with any authorized user relationship, make sure you understand the risks. You are responsible for paying if your child doesn’t
What are other ways to get a child credit-ready?
Adding your child as an authorized user isn’t the only way to prepare them for credit. These steps can help them build strong money habits before they ever apply.
Talk through credit basics early and often. You could look over your credit reports together, or explain how many hours you need to work to pay for things that are important to them, such as dinners, fun outings with their friends or their favorite snack at the grocery store.
Help them open a bank account in their own name. Having their own checking and savings account gives your child opportunities to practice managing money before they graduate to credit.
Consider a credit-builder loan. These are small loans that are meant to help people who are new to credit or are rebuilding it. The lender holds the loan amount in a savings account while payments are made, and each on-time payment is reported to the credit bureaus. Once the loan is paid in full, your child gets the money, making this a great way to build credit and savings at the same time.
📌 The bottom line: You don't have to give your child a physical card for them to learn about credit, but it's one option. If you want to add your child as an authorized user, choose a well-managed credit card with a long history and a low balance.
» Ready to get started? See our picks for the best savings accounts for kids.
This article was written by NerdWallet and was originally published by The Associated Press.
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