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Adding your child as an authorized user on your credit card can give them a head start in building credit, but know the risks first

By January 22, 2021 February 17th, 2021 63 Comments

As parents, we want our children to have the best possible start in life — from getting good grades and excelling at sports and activities, to learning responsibility by holding a part-time job. Some go even further to set their children up for saving and investing by opening a custodial account for them, like a Roth IRA for kids or a UTMA/UGMA.

There’s another easy step you can take to give your kids a financial edge: Adding a child to your credit card as an authorized user may help them build a credit history and score by piggybacking on yours. Then, once they reach adulthood, they’ll have a better shot at getting approved for lucrative rewards credit cards and other forms of credit (like loans or mortgages).

Adding a child to your credit card account as an authorized user can boost their chances of getting approved for cards when they’re able. Patrick Foto/Getty Images

That said, adding your child as a credit card authorized user isn’t without risk. Here’s how to decide if this strategy is a good fit for your family.

Should you add your child as a credit card authorized user?

Minors under the age of 18 cannot open their own credit cards by law (or get approved for other forms of credit), so adding children as authorized users is a simple workaround many parents use to give their kids access to the convenience and benefits of a credit card.

An authorized user receives their own card, with their name on it — but it’s tied to the primary cardholder’s account.

Adding a child as an authorized user can build their credit

Once a child is no longer a minor, they’re eligible to apply for their own cards — but that doesn’t mean they’ll get approved. Without a credit history or score, most rewards credit cards are out of reach, even if the child has an income. While some issuers offer student credit cards that don’t require lengthy credit history, they often come with fewer rewards and lower spending limits.

Quick tip: Some banks, like Chase and Citi, don’t ask for an authorized user’s Social Security Number. However, credit bureaus can still match up the user’s date of birth and address with a credit file.

When you add your child (or anyone) as an authorized user, most major issuers will report the credit card account to the three main credit bureaus — then the account, and its history, will usually reflect on the user’s credit file. However, some issuers won’t report until the child reaches a certain age, and bureaus have varying policies on when they will include authorized user accounts on a report.

In general, as long as your own credit score and account history are positive, adding your children as authorized users may give them a much-needed boost when they’re legally able to apply for credit. But bear in mind that any changes they make are your responsibility, and any changes — positive or negative — to your account could impact your authorized users, too.

For these reasons, if you’re making your child an authorized user to build their credit, you should only add them to accounts with a solid payment history, and ideally to cards you’ve had open for a long time. One of the factors that affect a credit score is the average age of accounts, so a card you’ve had open for years would carry more weight than one you’ve recently opened.

Minimum age for credit card authorized users

The major credit card issuers allow you to add minors as authorized users, but several have minimum age limits. Most big banks will report authorized user accounts to the main credit bureaus, including the issuers listed below.

Screen Shot 2021-01-21 at 2.53.06 PM.png

 

Occasionally banks have even offered bonus rewards for adding authorized users, and some allow you to do it online.

Benefits of adding a child as an authorized user

Along with potentially giving your child a head start on building credit, adding them as a credit card authorized user has other benefits.

Credit cards can teach financial responsibility

Having an authorized user credit card can help show young adults how to use credit responsibly. Setting limits and keeping kids accountable for what they spend — including making on-time payments and not charging more than they can afford to pay back — can lay the groundwork for responsible credit management in the future.

You’ll earn rewards for their spending

Here’s a bonus for parents: The charges your authorized users make will show up in your primary account, and any rewards earned from their spending go to you, as well. This is particularly helpful if you’re stocking up on points and miles for a trip or working toward meeting a minimum spending requirement for a new credit card welcome bonus.

Access to funds in an emergency

Older children may find themselves in situations where they don’t have the cash on hand to cover an urgent or unexpected expense — for example, if your teen’s car breaks down and you’re not nearby to help. Having a credit card in their own name can be handy, especially in cases where a merchant won’t take a parent’s credit card number over the phone.

Travel perks and purchase protection

A number of cards offer authorized users some of the same perks as primary cardholders, although it’s not always free. For example, it doesn’t cost anything extra to add someone to your Chase Sapphire Preferred® Card account, and authorized users receive the same travel insurance and purchase protections when they use their card.

However, it costs $75 per year to add an authorized user to the Chase Sapphire Reserve®. That’s because, in addition to getting the same travel and purchase coverage as the primary cardholder, each authorized user receives their own Priority Pass Select airport lounge membership.

This can be well worth the expense for older children who travel alone, or for large families who want airport lounge access — because the Priority Pass membership from the Chase Sapphire Reserve® only allows two guests.

Risks of adding a child as an authorized user

Adding your child as an authorized user to give their credit history a boost is not without pitfalls. If you plan to actually let the child use the card, it’s important to establish guidelines about when they can use it and how much they’re allowed to spend. Some kids are more responsible than others — and you know your child best.

Charges they make are your responsibility

Kids don’t always make good choices, especially if they’re tempted by a shiny new gadget or want to keep up with their friends. Even if you’ve set clear rules about spending on an authorized user card, it’s possible your child could slip up and rack up charges neither of you can afford.

You can’t go back and claim a fraudulent or unauthorized charge with the credit card issuer, either — authorized user spending is still your responsibility. So be sure to keep a close eye on your child’s spending and reinforce the limits you’ve set (and if you don’t trust your kid to stick to the rules, consider putting the card away unless it’s for a specific, supervised purchase).

Your credit score could suffer

Whether your child spent with your permission or not, if you have to carry a balance as a result, your credit score could suffer. Balances you owe, as well as increases in your total utilization (the amount you owe compared to your credit limits), will cause your credit score to drop.

Some banks, like American Express, allow you to set spending limits for additional cardholders — without affecting your own credit limit. So before you send your teen to the mall with their pals, it’s not a bad idea to put a cap on what they can charge if your issuer allows it.

If your credit takes a hit, theirs might too

Your credit score might be solid right now, but sometimes life goes sideways — for instance, a job loss or an unexpected major expense could affect your ability to make payments or cause you to max out your credit limit. If your credit score drops due to late payments or increased utilization, your authorized user’s credit file may be affected, too.

If you’re faced with this situation, you may want to remove your children as authorized users to prevent any damage to their credit file.

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