Think twice before sharing credit card accounts with kids

When card accounts are shared, one person's mistakes hurt everyone

By Erica Sandberg

Opening Credits

Erica Sandberg is a prominent personal finance authority and author of "Expecting Money: The Essential Financial Plan for New and Growing Families." She writes "Opening Credits," a weekly reader Q&A column about issues for people who are new to credit, for CreditCards.com. Ask a question. 'Opening Credits' stories

Dear Opening Credits,
My 21-year-old son, who is a university student, was denied a credit card. I suppose he has no credit history and minimal income. Would adding my son to one of my credit cards -- as a joint account holder, if possible -- help him to establish credit? Or would adding him as an authorized user accomplish the same thing? Thank you -- Sheryl

Dear Sheryl,
The quick answer is, yes, adding your son to one of your accounts can jump-start his life in the world of credit. But I don't recommend you do it. Because your boy's been an adult for a few years, it would be far better for all concerned for him to stand firm on his own two financial feet. That means obtaining a credit card without your generous assistance.

While being helpful to your kin is nice, allowing anyone to share your credit is overly risky. As a joint account holder, your son would be equally responsible for whatever balance is on the card. As an authorized user, he would be just a guest with charging privileges -- but with no contractual obligation to pay. In both cases, though, the two of you would share the same credit history of using that particular card.

"So what?" you may think. "I trust him!"

Well, that's great, but mistakes can -- and often do -- happen. For example, either one of you could max out the card, pay late or somehow let the account go into collections. If any of this happens, your credit report -- and your son's -- will be equally dinged.

Mind that it's not just credit history that suffers. Resentment also builds, causing stress on important relationships. Trust me; I've seen it happen over and over again.

Thankfully, there are ways for your son to get a card without having to borrow your good name. It's not clear for which accounts your son has been denied, but there are two basic types I suggest he check out:

Student credit card: Because Junior has already had his 21st birthday, he not only gains lawful admission to campus pubs, he can also get a credit card without you having to guarantee the account. He won't need perfect credit either -- a quick look at the student credit cards that are currently available indicates that some just require a credit score of about 620, which is in the "fair" range.

Secured credit card: If he doesn't qualify for the student card because his income or score is too low, he can always pursue a secured credit card. I happen to adore these products because they make so much sense. To get one, your son would need to put down some funds in a security account with the financial institution. That sum of money is held as collateral and is typically is the amount of the credit line. Secured cards are usually very easy to get because the issuer assumes so little risk. If your son fails to pay as agreed and defaults, the bank or credit union can just take the collateralized funds.

Now, when your son does have a card in his name only, he'll need to concentrate on building a really awesome credit history so he doesn't have so much trouble the next time he wants to borrow. The two most important ways to achieve a great credit history are to repay all charges in full by the due date and never, ever miss a payment.

Sounds simple, right? Intellectually, it is, but an open line of credit can be ridiculously enticing. He'll need to learn self control. Rounds of beers at the aforementioned drinkery are easy to put on the card, but they're hard to repay with limited dollars.

And when you think about it, Sheryl, isn't this reason enough to keep your plastic separate?

See related: 10 ways students can build good credit, Credit reports: How do get the one that is actually free

Erica Sandberg's articles and insight are featured in such publications as the Wall Street Journal, Pregnancy, Babytalk, Redbook, Bank Investment Consultant, Prosper.com, MSNMoney.com, and Smartmoney.com. An active television and radio commentator, Erica is the credit and money management expert for San Francisco’s KRON-TV, a frequent guest on Forbes Video Network, Fox Business News, Businessweek-TV, and all Bay Area networks. Prior to launching her own reporting and consulting business, she was affiliated with Consumer Credit Counseling Services of San Francisco where she counseled individuals, conducted educational workshops, and led the media relations department. Erica is a member of the Society of American Business Editors and Writers, and on the advisory committee for Project Money.

Send your question to Erica.

Published: November 3, 2010

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