How to earn rewards on your teen's spending
Adding your daughter as an authorized user can build her credit and help you amass points
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Dear Cashing In,
My daughter is 16, and she has her own debit card linked to her checking account. Ever since she started driving, she likes to go to the store and buy her own groceries and have us pay her back. We also pay her back for some of her gas and occasional meals out. It’s great that she is independent, but I hate that her increased spending does not get any rewards because it is on a debit card. Any solutions? – Scott
It’s great to see teenagers make the successful transition from children to adults. There are many important steps in that journey, and parents are crucial to helping their teens become independent.
Financial experts say that one way to help teach teens about money is to let them manage their own savings and spending. That way, they learn the value of money. If they become accustomed to parents underwriting all of their expenses, that creates an incentive for them to keep on spending.
There is probably a smart balance you can strike in which you cover the teen’s basic needs (such as family groceries), but let her cover extras, such as dining out with friends.
But you are right that if she is paying with a debit card and you reimburse her, neither of you is earning rewards on those purchases.
You might think it would be a good idea for her to get her own rewards credit card. However, applicants have to be 18 to receive a card, and even then, they have to have their own income or assets – not yours. Otherwise, they will have to wait until age 21. That’s the law.
In addition, first-time applicants typically lack the credit history to be approved for rewards cards that typically require excellent credit.
But there is a potential solution. If you want to earn rewards when she buys something, the most sensible way to go would be to add her as an authorized user on one of your credit cards.
Make sure you understand how adding an authorized user works before agreeing to it. Your daughter would receive her own card. You would be responsible for any spending on that card. You also would receive any rewards associated with that spending.
My colleague Allie Johnson wrote a thorough piece on the details of adding your teen as an authorized user (see: “What’s the minimum age to be an authorized user?”), including a helpful chart listing the minimum ages for major banks and precisely what type of information you must provide.
Since any charges are your responsibility, make sure your teen is responsible enough to use a credit card. Make sure she understands she is to use the card only for expenses that you intend to reimburse, and she is to use her debit card for her personal expenses.
Or you could have her charge everything on the credit card and pay you back for her expenses, but that seems more complicated.
Conversely, make sure that you are smart with credit, because if you fall behind on your payments, that will sink your credit – and your daughter’s and any other authorized user on your credit card..
I wouldn’t apply for a new card just for your teen’s spending. I would add her to one of your existing cards.
If you have a few rewards cards, consider where she spends most of her money. For example, if she makes most of her purchases at the grocery store and you have a card such as the American Express Blue Cash Everyday card (no annual fee), that card gives you bonus cash for grocery spending, so adding her to that card would make sense.
Eventually, she will be old enough to have her own cards and earn her own rewards. Now that’s a mark of true independence!
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