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:
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:
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.
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.
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.
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.
