When my son was 16, I made a decision that many of my friends with teenagers thought was a little "out there": I let him have his own credit card.
To be clear, it wasn't really his "own"; I added him as an authorized user on one of my own credit cards. A week or so later, after I provided my credit card issuer with his name and social security number, my son received a shiny new card in the mail, complete with his own card number.
Now instead of pestering me for my credit card to buy online games, music, and clothes, he'd have his own card to make those purchases. He'd have a credit card in his wallet when he was driving so he could fill up the gas tank when it was almost empty or have a resource to use in case of an emergency.
My decision to give my minor child a credit card came down to this: I realized that in less than two years, I'd be losing a lot of control over my son's finances. He'd be an adult, free to make his own decisions about his money and credit: how to spend his cash, when to save it, and how to deal with life's inevitable financial challenges. I didn't know a thing about credit when I got my first card in college, and a couple times found myself stressed out when my minimum payments were more than I could afford to pay. My gut told me this was a good opportunity to guide my son to use credit wisely and responsibly. This skill would serve him well in adulthood.
As he studied the plastic card in his hand, a wide smile spread across his face. I could see that his mind was imagining all the things that were now within his purchasing reach.
That's when I let him know his credit card came with some rules.
First, any purchases he made with his card had to be paid by the statement closing date. He had to be sure he'd have money when payment was due; I would not be fronting him the money so he could meet his obligations. If he couldn't pay what he owed, then he needed to go without and wait till he'd saved the money.
I explained I do not like carrying balances on my cards because it means paying interest, so I pay them off in full every month. I expected him to pay his balances in full, too.
Second, I would be getting notifications on my smartphone with every purchase he made and I had the right to question those purchases. If I noticed he was using his card indiscriminately, it would be taken away from him.
Third, he had to practice safe card usage. His card needed to be stored safely in his wallet. I didn't want to find it stuck in his back pocket when I was doing laundry or jammed into the car seat. I told him as he used the card, I would be giving him pointers that would help keep his credit safe and protect him from being the victim of a scam. He agreed to listen to me, especially because he'd seen the damage that had been inflicted on a family member through identity theft.
And fourth, I shared with him that by the time he was an adult, he'd have a credit history as an authorized user. He'd be getting a boost from my good credit so when it came time for him to be on his own, he'd have a credit score he could be proud of...one that would help him do things like rent an apartment or buy a car without a co-signer as long as he had a job.
I'm happy to report that my son used the card responsibly for 18 months. I'd be at work and my phone would ding with notice that a game had been purchased with his card. A day later, I'd get a notice that a payment had been made to the card in the same amount. He could have waited till the closing date, but he decided it was easier to pay it off while he had the money in his PayPal account. I didn't argue.
When he decided to buy something big — a new piece of computer hardware — he asked me first if it would be okay to use his card. I told him not only could he do that, but it was smart to do so because the card offered purchase protections his debit card didn't have. As with the games, he paid his debt quickly...and the computer hardware arrived without any problems.
Last week my son turned 18. And today he checked his FICO score: a very respectable 758, a score many fully realized adults would be proud to have. Not only has he learned how to manage his credit, he has a good understanding why his credit score and history matter. I hope he continues to keep up the good work so that he can start his adult life avoiding many of the mistakes young people make when they're on their own, such as living beyond their means, paying their bills late, and damaging their credit enough that it impacts their ability to land jobs or rent housing.
So if you're thinking adding your minor child as an authorized user to your credit card, here is some advice for you:
1. Make sure your child is ready for the responsibility of being an authorized user on your credit card account. If you have any doubts, don't do it because you are ultimately responsible for any charges they make with their card. Instead, you could set them up with a debit Mastercard attached to their own checking account and observe how they handle the responsibility. My son had a debit Mastercard when he was 14; he had a couple hiccups with it, such as trying to pay for items when deposited checks hadn't cleared, but these real-world experiences were a good and relatively inexpensive education. As for an age guideline? Fiscal responsibility isn't necessarily age-related; one child at 16 may be fine with a credit card, while a 26-year-old child could be completely irresponsible with it. Make your decision based on the individual, not a somewhat arbitrary age guideline.
2. Establish rules for usage. I let my son make his own decisions about what he could buy; he just had to make sure he had money to pay for those purchases when the bill came due. Your rules may be different. Another parent I know will only let their child use a card for gasoline and auto emergencies. Bottom line: your credit, your rules.
3. Check with your credit card company for an age requirement. My credit card had no minimum age for authorized users; others may have specific ages when minors can be added. When I asked Tom Becker, Hanscom FCU's chief lending officer, about our policy, he said, "We may approve a child as an authorized user as long as the parent is on the account and the account is handled in a responsible manner. If the child is under 17, we'll ask the parent to sign to acknowledge their child is requesting a card."
4. Make sure your credit is in tip-top shape before you add an authorized user. If you have a great credit score, you'll be helping your child start their financial life with a great score, too. Likewise, if your credit score isn't so great, your child will "inherit" that history. It may be best to hold off on adding them as an authorized user until your score has improved.
If you're thinking about adding your child (or anyone!) as an authorized user on your credit card, download our 20-Something's Guide to Savvy Credit Card Ownership first. It's free and even if you, your child, or authorized user aren't in your 20s, you'll all learn something new.
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