Adding a child as an authorized user to an adult’s credit card could provide a foundation for the child’s credit history, but the ploy could also backfire if the parent is not a responsible card user.
A recent creditcards.com survey showed 8 percent of U.S. parents report that their children under age 18 have credit cards.
And a 2017 survey by T. Rowe Price revealed 18 percent of children in the 8-14 age group have credit cards.
Is it a good idea to authorize your children to use your credit card so that they can build up credit history? Reader Crystal, a parent whose 16-year old son belongs to the card-carrying club, wonders if this will help him build up a credit history. He has been an authorized user on several of his parents’ cards for more than a year.
However, on running a credit check, she finds he does not have a credit history.
Credit bureau and card issuer policies vary
Whether your child will develop a credit history of their own by adding them to your account as an authorized user depends on whether the credit card issuer reports information on authorized users to at least one credit bureau.
TransUnion only creates a credit history if the reported user is 16 or older, a company spokesperson said. Moreover, the lender has to provide adequate information for TransUnion to create a credit file. Experian has a similar policy, and will not provide credit history for a minor until the age of 18, a spokesperson clarified.
At that point, whether or not there is a credit history to display for the child depends on whether the issuer has been reporting the child’s account to the credit bureaus in the child’s own name. While many card issuers do report authorized user accounts, some do not.
And credit card lenders have their own policies about the minimum age for an authorized user:
- Experian reports that Bank of America, Capital One, Chase, Wells Fargo and Citi are among the issuers that do not require a minimum age for an authorized user.
- Barclays will allow a parent to tack on a 13-year oldchild as an authorized user, while U.S. Bank has a minimum age requirement of 16, and Discover will approve a 15 or older authorized user.
- An American Express spokesperson clarified that a parent could add a child 13 or older as an additional card member on an account. Unlike most authorized user accounts, though, the child would get a card in their own name, with a unique card number. Amex would report the child’s card usage to the credit bureaus once they reach the age of 18.
Considering this multitude of policies, it’s best to talk to your card issuer to find out what their particular authorized user age policy is, as well as how they report the activity of authorized users to the credit bureaus.
Building a secure credit foundation
Another thing to keep in mind is that your ploy to help your child build a credit history could backfire if the child is impacted by any negative report on the primary cardholder.
An Experian spokesperson cautions, “Keep in mind that although the authorized user is not responsible for any charges on the account, any negative payment history or high balances could impact the child as well as the primary cardholders.”
However, Amex has a more beneficial policy. The Amex spokesperson pointed out, “We do not report delinquencies to the bureaus the additional card member is not responsible for payment, so, therefore, not penalized for the actions of the main account holder.”
Moreover, if the additional card is lost or stolen and has to be canceled, there is no impact on the primary account holder, since their card will not need to be replaced as well.
Make sure your child is mature enough to handle a credit card responsibly before you decide to add them as an authorized user to your account. Be clear about who will be paying the bills, too.
Having your child pay their own bills could be a way to teach them responsible money management. And if you are going to be the one footing the bills, you should be clear about what the child’s limits are and constantly monitor their credit card usage.