Should I Give My Kids Credit Cards?
Credit cards are a useful tool for any young adult starting out who seeks to build a credit history that can lead to a strong credit score and profile. A strong credit profile that includes a history of consistent timely monthly payments leads to an ability to attract more credit, eventually allowing an adult to secure larger-ticket loans such as for an automobile or home mortgage.
For young adults, the additional purchasing power that a credit card provides for budgeting and emergencies is nice, but the opportunity to build a strong credit history built on responsible financial behavior is actually more important as an individual moves through adulthood. But, what about kids – should parents give their kids credit cards? Interesting question. Let’s take a closer look.
Build a Strong Credit Score and Profile
Just as an adult can work toward building a strong credit profile through consistent timely monthly payments of credit card debt, so can someone a bit younger. Individuals as young as eighteen can have their own credit card accounts – but kids even younger can be added as authorized users to one of their parents’ accounts.
In fact, a 2017 survey conducted by T. Rowe Price revealed that 18% of kids between the ages of 8-14 are listed as authorized users on one of their parents’ accounts! Though not all credit card issuers report authorized user account information to the three major credit bureaus (Experian, Equifax, and TransUnion), it is worth investigating with your credit card customer service department to determine whether they do.
Since all positive credit events that do get reported to the major credit bureaus positively impact the credit profiles of all authorized users, it becomes possible in this way to build a strong credit score and profile for a younger child. Meantime, many major credit card issuers including Bank of America, Capital One, Chase, Citi and Wells Fargo have no minimum age requirement for adding authorized users to an existing account.
Benefits of Giving Kids Credit Cards
The opportunity to build a healthy credit history is not the only benefit that can result from giving your kids credit cards. However, before we discuss this any further, it is impossible to overemphasize the importance of your child gaining an understanding of the responsibility that comes with access to a credit card.
There is no magic bullet test for maturity and readiness, but your child must understand that the credit card usage will be supervised as he or she slowly learns how to use credit responsibly. Decide who will be paying the bill each month and explain the concept of interest expense on an outstanding debt balance.
This is an opportunity to teach your children early about the perils of accumulating excessive credit card debt and the costs involved. Additionally, a credit card can be used as a tool for teaching about budgeting and keeping spending within means – both of which prepare a child for adult personal financial responsibilities.
Finally, a credit card in your child’s name can also come in handy for potential emergencies when travelling or driving and for small online purchases.
Set Limits For Your Kids With Credit Cards
There’s little question that there are benefits to helping your kids learn about responsible credit card usage – but only within limits. For starters, helping your kids understand monthly recurring charges such as a cell phone bill that is placed on autopay with a credit card is a good idea.
It pays a bill, prevents late fee charges on it, and provides an opportunity to pay off a relatively small debt balance on the credit card before significant interest expenses accrue. Some credit cards, including American Express, allow cardholders to set a credit limit for an authorized user and provide email updates related to spending history.
Call the customer service department of your credit card issuer to ask about these features. If your card issuer does not allow for pre-set credit limits, you can define an online spending limit with your child and monitor purchases as they occur, keeping certain that they do not exceed the agreed upon limit.
Is My Child Ready For a Credit Card?
The bottom line is that adding a child as an authorized user can have significant benefits in terms of aiding in building a credit history early while learning about credit and developing responsible habits.
However, a parent knows their child better than anyone – and it is an entirely subjective decision as to whether a child is mature enough to handle the responsibility that comes with access to a credit card. Remember – any purchases made by an authorized user become the primary cardholder’s responsibility.
If you think your child is mature enough for the responsibility involved, great, go for it. Otherwise – better to wait. As the saying goes, “If there’s doubt – there’s no doubt.”
About The Author: Steven Brachman
Steven Brachman is the lead content provider for UnitedSettlement.com. A graduate of the University of Michigan with a B.A. in Economics, Steven spent several years as a registered representative in the securities industry before moving on to equity research and trading. He is also an experienced test-prep professional and admissions consultant to aspiring graduate business school students. In his spare time, Steven enjoys writing, reading, travel, music and fantasy sports.
Time and again, I did not know how to handle my debt
Time and again, I did not know how to handle my debt. Even when I paid my credit cards off, a few months later I was back in the same situation. But this year is different. I contacted United Settlement...
Business debt relief is what I needed when I contacted the United Settlement crew
Business debt relief is what I needed when I contacted the United Settlement crew. They are committed to helping people like me who requires more help with business debt problems. I had several loans out...
Student loan debt was the reason that I reached out to United Settlement
Student loan debt was the reason that I reached out to United Settlement. I had about 200K plus in student loan debt for my business degree. I recognized that I had to do something when I struggled to make...
There is nothing worse than falling ill and then having to deal with super expensive medical bills
There is nothing worse than falling ill and then having to deal with super expensive medical bills that you really do not have the patience or experience to handle. I was pleased with my experience with...
I took out a few personal credit cards to open my boutique
I took out a few personal credit cards to open my boutique. When than money ran out, I went on to take out more loans for my business. However, this quickly turned into a disaster. Today, I now have a mountain...
Who knew that auto loans were so negative for your credit lines
Who knew that auto loans were so negative for your credit lines? Especially, if they are not paid off right away. As a married couple, we had vowed to keep auto loan debt at bay. But, we found ourselves...
I didn’t have a ton of debt when I contacted United Settlement
I didn’t have a ton of debt when I contacted United Settlement, but what I wanted from them was some information about how to handle my debt management. I knew that I needed some more information to get...
Federal student loans were the reason I ended up at United Settlement
Federal student loans were the reason I ended up at United Settlement. I had about $200K to pay back and I was not quite sure where to tackle that debt once I got out of school. But I reached out to that...
Everyone knows how horrible student loans are
Everyone knows how horrible student loans are. For me and my family, they had become more than just an annoying monthly bill. They had taken over our lives. That’s why I decided to take action and find...
I wanted to be more informed about my own personal and business debt
The number one reason I chose to contact United Settlement was I wanted to be more informed about my own personal and business debt. When you have credit card debt, it can be extremely frustrating. Especially...
I cannot believe I was finally able to find a company to actually help me pay off my debt
I cannot believe I was finally able to find a company to actually help me pay off my debt! I thought I would forever be chained to debt. But United Settlement offered me multiple solutions for paying off...
What your money can do for you.
The great reviews that you have thanks.
Dealing with high interest auto loan debt was difficult for me and my wife
Dealing with high interest auto loan debt was difficult for me and my wife. We thought we got a good deal, but it actually was a horrible loan. So, we reached out to United Settlement, and they got to work...
No one really wants to go bankrupt, and neither did my family
No one really wants to go bankrupt, and neither did my family. But fortunately, we did not have to go that route. It was our last resort, but United Settlement helped us figure out a way around bankruptcy...
I had been through about 5 different credit counseling agencies before I found United Settlement
I had been through about 5 different credit counseling agencies before I found United Settlement. I had read through their reviews and made the decision to move forward with them. I also was so impressed...
Save time and money
Just what I needed, already had a company I was working with and I switched because I was able to same some money. Brian and Alfred were really nice and helpful
As a business facing some unwanted financial difficulties
As a business facing some unwanted financial difficulties, we were at a loss for what to do next when our debt started to soar. We took a closer look at our financial situation by contacting United Settlement....
I had no clue how to create a debt management plan
I had no clue how to create a debt management plan and in fact, I didn't even know what a debt management plan was. Fortunately, I reached out to United Settlement before I had too much debt to tackle....
Being burdened by debt is one of the biggest struggles we faced as a family
Being burdened by debt is one of the biggest struggles we faced as a family. But these people at United Settlement were very helpful in deciphering the different debts we had and then coming up with a debt...
Student loan debt was my worst enemy before I ran into United Settlement
Student loan debt was my worst enemy before I ran into United Settlement. I really thought I would just have terrible credit for the rest of my life because I will never get out from underneath it. It was...