Welcome to Q & A Wednesday on Millionaire Habits where I answer one of your questions every week for the benefit of 20,000 people.
💡 Question: “Steve, when should my child get a credit card? How young is too young?”
I am a big proponent of letting your child get a credit card. While your child needs to be 18 years old to open their own credit card, most credit cards let parents add their underage children as “authorized users” on their cards.
Is a credit card right for your child? Maybe. Here’s how to find out.
When Should My Child Have a Credit Card?
While I can’t provide a one-size-fits-all answer to this question, I can make it easier for you to answer that question yourself.
As I said above, I’m a fan of adding your child as an authorized user to one (or more) of your credit cards. With tight parental controls, of course! Authorized users can make charges to the primary account holder’s credit account and the authorized user builds credit.
While American Express has a minimum age of 13 for authorized users, many other card providers, like Bank of America, Capital One, Chase, and Citi, do not have a minimum age requirement.
Technically, you can add your newborn as an authorized user!
The primary benefits of adding your child as an authorized user include:
Teaches financial responsibility: By giving your child a credit card, you provide an opportunity for them to learn financial responsibility at an early age. They can learn to manage their expenses, make payments on time, and develop good budgeting habits.
Helps your child build credit: Responsible credit card usage from an early age can help your child build a positive credit history. This can be beneficial when they apply for loans, mortgages, or other forms of credit in the future.
Emergencies: A credit card can provide your child with a safety net. They can use it to cover unexpected expenses or urgent situations when cash is not readily available.
Remember: As the primary account holder, you are responsible for all purchases your authorized users make, which could hurt your credit if not closely monitored. Legally, you’re on the hook for everything on that card.
Before giving your child a credit card, have a talk with them and discuss your expectations for their credit card use. Make sure they understand this isn’t extra money. They are responsible for paying their credit card bills.
- What can and can’t be bought using the card?
- Will they make payments to you or to the bank?
- How much are they allowed to spend each month?
- Do they need to ask you before making a purchase?
- Which stores can they use the credit card at? Is online okay?
- What are the consequences if they overspend or break the rules?
Ensure they understand the credit card is a responsibility.
If your sole purpose is to build credit for your child, one option is to hold onto the authorized user cards so your child can’t use them. Your credit usage will still help them build credit even if they don’t use their card.