When someone wants to take out a loan or get a credit card, a lender checks the person’s credit. College students and recent graduates can have their applications denied if they don’t have a significant credit history. Adding your child as an authorized user on your credit card can help build his or her credit. Before you make that move, understand the risks and set some clear ground rules.
What Is an Authorized User?
An authorized user is a person who is allowed to make purchases using someone else’s credit card. The authorized user can make payments, but that individual is not legally responsible for the debt. The primary account holder is.
Some credit card companies allow a primary cardholder to set a line of credit for an authorized user that’s less than the card’s total credit limit. With other card issuers, an authorized user has access to the card’s full credit limit.
What Are the Advantages of Making Your Child an Authorized User?
Allowing your child to use your credit card can help him or her learn how to prioritize and budget. A record of on-time payments can show a lender that your child can manage debt responsibly and help your child get approved for a credit card, car loan, or mortgage in the future.
Giving your child a credit card can also benefit you. You’ll have peace of mind from knowing that he or she will be able to cover routine expenses and unexpected costs. If the credit card earns points that you can redeem for cash back or other rewards, making your child an authorized user can help you rack up more points.
What Are the Risks of Making Your Child an Authorized User?
You will be legally responsible for charges that your child makes as an authorized user. Think carefully about your child’s maturity level and ask yourself if making them authorized users would be a good idea. Making your child an authorized user might cost you. Some credit card companies charge a fee to add an authorized user.
What Kinds of Rules Should You Set?
If you want to make your child an authorized user on your credit card, you’ll need to have a frank conversation and set some rules. You might want to place a cap on the amount your child is allowed to spend each month and require him or her to pay off new charges before they accrue interest. You might only allow your child to use the credit card for certain types of purchases, such as school supplies and emergencies.
To make your child an authorized user, you can call the customer service number on the back of your credit card. You might also be able to make the change online. If you have questions about fees, credit limits, or other issues, contact your card issuer.
