As you begin teaching your children about money management, credit is likely to be a topic of conversation. After all, an established credit history and good credit score are all part of being financially secure. But how can you give your children's credit history an early boost while also teaching them about financial responsibility? One option to consider is to add them to your credit card. This will help them to build credit and give them access to money in an emergency.
Is it possible to add my child to my credit card?
Most large credit card issuers will let you add your children to your account as an authorised user or second cardholder. However, some credit card companies have minimum age requirements, and those that don't may impose an annual fee per additional cardholder. As an authorised user on your credit card, your child will be able to make payments on your account but you will be ultimately responsible for all charges.
At what age can you add your child to your credit card?
No one can legally open a credit card until they are 18 years old. However, some of the larger credit card providers will allow you to add an under-18-year-old to your credit card as an additional cardholder. Some have no minimum age requirement but others require additional cardholders to be at least between the ages of 13 and 16.
Does adding my child to my credit card help their credit?
Once your child becomes an adult, they can apply for their own credit cards. But that doesn't necessarily mean that they will get approved. Most credit cards will be out of reach without a solid credit history or a good credit score, even if your child is earning a regular income. Adding your child to your credit card could help give them a leg up with building their own credit history. However, credit bureaus have varying policies for authorised second credit card users on credit reports. It's a good idea to check the small print before you apply to authorise your children. If you are looking to add your child to your credit card, make sure you have a good credit score and account history
What you need to know before adding your child to your card
Before you get the ball rolling to add your children to your credit card, there are a few important things you should keep in mind. For example:
Is your child responsible, and can they follow your rules?
You need to know that your child will stick to any rules and limitations you put on their use of your credit. Decide in advance what these rules will be, for instance, paying you back, paying the credit card bill themselves, where they can use the credit card and what they can buy. Also, spend time thinking about the consequences should your child break the agreement, miss a payment or overspend. If you have concerns that your child isn't ready to stick to your rules or that they will break them when given a chance, you may wish to wait longer before adding them to your credit card.
Does your child understand credit cards?
Your children don't have to be financial whizz-kids to be authorised to use your credit card, but they should at the very least have a basic understanding of credit limits, interest rates and balances. Review their experience with debit cards and cash. Have they shown themselves to be responsible with money? If your child understands how their spending can affect their credit — and yours, as the main account holder — and why it's important, then they may be ready to be added to your account.
What is the state of your credit?
When you add your child to your credit card, they can benefit from your good credit history. But it can also damage your credit if they miss payments or their spending goes unchecked and they end up maxing out your credit. This could drag down your credit scores and harm your chances of getting more credit in the future.
What are the benefits of adding my kid to my credit card?
There are several benefits to letting your child start swiping with your credit card:
- Safety — Credit cards offer better consumer protection than cash or debit cards.
- Credit history — Giving your child access to credit can help them build their credit history and may result in better rates and rewards in the future.
- Education — Guiding your child through the use of a credit card can teach them about managing credit, from paying balances on time and interest rates to minimising the risk of damaging credit.
- Emergencies — Adding your child to your credit cards means they always have access to funds in an emergency, so they will never be left stranded.
Are there any disadvantages to adding my kid to my credit card?
Adding your child to your credit card may have certain drawbacks:
- Increased risk — Additional credit cards can mean more risk of fraud and theft through unsafe online shopping or if they simply lose the card.
- Your credit score could suffer — If you end up carrying a balance due to your child's spending, it could affect your credit score.
- Their credit score could suffer — If your credit score drops due to your spending or a large, unexpected expense, your child's credit file may also be affected.
- Cost of fees — Some credit card providers may charge fees for each additional cardholder.
What are the alternatives to adding my child to my credit card?
An alternative to adding your child to your credit card is to set them up with a prepaid debit card. If your child is between six and 18, they may be eligible for a GoHenry prepaid debit card, which they can use to withdraw cash and make in-store and online purchases. Not only does it give them a degree of financial independence, but a GoHenry debit card also teaches them valuable money management skills.
You can set up the account in such a way that you make regular or one-off payments instead of pocket money, Christmas or birthday money, or payments for chores. And with Giftlinks, friends and family can even send money straight to their GoHenry card. This allows them to enjoy a feeling of financial independence while you keep a watchful eye over their spending and set limits to help keep them in check. To set up your child's GoHenry account, simply download the free mobile app or sign up online.
Adding your child to your credit card can be the first step to teaching them important lessons about money management and trust. But not every child is ready for the responsibility that comes with credit cards, so prepaid debit cards like GoHenry offer a great alternative.