Adding your child as an authorized user on your credit card can be an intimidating process.
As an authorized user, your child will be able to make purchases with your credit card, but won’t suffer the consequences for misusing the card. Instead, you will be the one who is held liable as the primary cardholder. Basically, your child can get the benefits of using a credit card without accumulating credit card debt. The only person responsible for paying it is you.
You may be wondering why you would even want to add your child as an authorized user since there is a high level of personal risk. Fortunately, the pros can outweigh the cons if you play your cards right. Here are a few reasons why you should consider making your child an authorized user:
Great Teaching Opportunity
If you want to teach your child about credit and how to use a credit card, there really is no better way than by teaching them with first-hand experience. And many parents have caught on to this teaching style. In fact, according to a 2017 T. Rowe Price Parents, Kids, and Money survey, approximately 18 percent of children between 8-14 have used or use credit cards.
If you believe you can trust your child with the responsibility of being an authorized user, then you will quickly find out that making your child an authorized user can prepare them for the future. After all, the more children know about credit and credit card operations, the better off they will be when it’s time for them to get their own credit cards.
How can you determine if your child is responsible enough to handle being an authorized user? Here’s a list of questions you can ask yourself before you take the first step:
- Have I recently talked to my child about proper credit usage?
- Does my child really comprehend the importance of credit?
- Does my child have an allowance? If so, is it used responsibly?
- Does my child understand the concept of saving money?
- Is my child usually honest with me?
- Has my child successfully been responsible in the past?
These questions are a good start when determining if your child is responsible enough to be an authorized user, but the decision ultimately relies on how well you know your child. You probably already recognize your child’s strengths and weaknesses and might be able to make a decision based on just that knowledge. Keep in mind, however, that some credit card lenders may have certain age restrictions for authorized users and may charge an authorized user fee.
Credit-Building Benefits
One of the more popular reasons why most people make their children authorized users is for the credit-building benefits. Obviously, the younger you are when you begin to build good credit, the better off you will be in the future. Quite a few adults struggle with credit simply because they started building credit at a later point in life. Those who wait to build credit may find it difficult to even get a credit card to begin with as some credit card issuers require a certain level of credit before approving a credit card.
Emergency Help
You never know when your child might be involved in an emergency situation. Although it’s not recommended to use your credit card as an emergency fund, it can definitely be beneficial for your child to have a credit card to use for emergencies. It’s important to establish these emergency situations prior to your child becoming an authorized user because of the potential consequences. For example, your child may overuse the credit card if you have different definitions of what constitutes an emergency. If this happens, you will be faced with paying off the credit card debt that they accumulated.
As long as you explain these emergency situations and your expectations thoroughly to your child before you make them an authorized user, you might not have to worry about this type of credit card abuse taking place. In the end, if your child does, in fact, come face to face with an emergency, it can be comforting to know that they have a credit card they can use.
The Bottom Line
In the end, it’s your choice whether or not to add your child as an authorized user. You might end up having to fix your credit if you make your child an authorized user before he or she is ready. Fortunately, there are ways to avoid credit and debt damage. Take the time to teach your child and create a trusting relationship in order to lessen your risks and have a chance at experiencing the many benefits that can come from adding your child as an authorized user.
