Getting a credit card for your child can help them build credit and learn how to manage money. Establishing good habits early can set them up for success in adulthood. So, when does it make sense to get your child a credit card? Let’s break it down.
Can you open a credit card for your child?
If your child is under 18, they are not old enough to open a credit card on their own. However, you can make them an authorized user on one of your credit cards, possibly as early as age 13. As an authorized user, your child will receive a credit card linked to your account. They can use the card for purchases, but you maintain control of the account and are responsible for payments.
Choose one of your cards that regularly carries a low or no balance (low credit utilization can help build credit) and a long, positive credit history. Contact your card issuer to confirm that the authorized-user account will be reported to all three consumer credit bureaus (Experian, TransUnion, and Equifax) for the greatest benefit.
Pros and cons of getting a credit card for your child
When you are deciding whether to get a credit card for your child, it is important to weigh the benefits and drawbacks.
Pros
- Build a credit history: By becoming an authorized user, your child can start building a credit history early. This can help them qualify for better terms on future credit cards and loans.
- Built-in protections: Credit cards can come with great benefits that can protect your child’s spending, such as zero liability fraud protection.
- Learn financial responsibility: Access to a credit card can help your child learn skills like budgeting, tracking expenses and responsible spending habits.
- Earn rewards: By making your child an authorized user on a rewards credit card, their spending contributes to you earning rewards such as cash back, points or miles.
Cons
- Risk of overspending: Your child may see a credit card as free money. If your goal is only to start building your child’s credit, you do not have to give them access to a physical credit card.
- You become their creditor: As the primary cardholder, you are responsible for charges your child makes. It is important to lay down the rules for use, set a clear budget and monitor their spending.
- Impact on your credit: If your child overspends and makes it difficult for you to pay your credit card bill, it can negatively affect your credit score. Review your child’s activity regularly so you can catch issues early.
- Impact to your child’s credit: If the authorized user account is reported to the credit bureaus, your credit mistakes could hurt your child’s credit score. Maxing out the card and late payments, for instance, could negatively impact their credit.
The bottom line
Getting a credit card for your child can give them a head start on learning to manage money and credit. That could mean adding them as an authorized user on one of your existing credit cards. They can build their credit, while you keep control over the account.
For more information on building credit, see the following articles: