I just got a new credit card, and if I add authorized users, I will get 5,000 bonus points for each person I add on the account. I added both of my sons to the account to get double the bonus. They are young (13 and 15). Their credit cards just came in the mail, and it feels really weird to see their names on them! Should I give them the cards, or hold them for them? Does their credit start building now? I am super curious to know what you think. Thank you, Erica! — Jocelyn
I see no reason why such young teenagers need to be in regular possession of credit cards. Most middle and high school students should still be in the basic commerce stage: Work or get allowance, decide what to buy, then spend accordingly.
For your sons’ purchases, I suggest either cash or a debit card attached to a banking account, which are good ways for young people to learn how to spend within their means. The more accustomed young people are to stretching their dollars, the better.
My recommendation? Take your sons’ credit cards and place them in a safe deposit box or locked drawer. I’m not implying that your kids will try to find them and then go on wild spending sprees — it’s just smart to store all supplementary credit cards in a secure place.
As long as you keep your credit card account active, your boys will be free to charge if and when you give them permission to do so. When you grant them charging privileges is up to you, but, in general, it should be based on what you would consider their “need.”
For example, if one or both of your children will be taking a vacation without you or another guardian, it’s a wise idea for them to have a credit card. With a credit card, if an emergency arises, they’ll be able to cover the expense without delay. Or, if they go off to college, they can use a credit card for books and other necessary materials. Just be sure to establish rules and limits on the use of the credit card, and spell out the consequences for abusing the privilege of using your account.
Yes, your credit card may also be listed on your teens’ consumer credit reports. Because you’ve named them as authorized users, the credit issuer can report the payment activity on the files of all account holders. As authorized users, your teens won’t be held legally responsible for any balance incurred with the card — even if they were the ones who made the charges. As the account owner, you are solely responsible.
If you pay your card bills on time and don’t carry over a large debt from one month to the next, your – and your sons’ – credit reports should reflect this positive information. Credit scoring systems use the financial data from these reports to create risk scores. If your credit card is listed on their reports now, it will be factored into their credit scores, and over time their credit scores should rise.
What does all of this mean? Not only are you getting a 10,000-reward point boost by attaching your teens to your account, you’re also providing your sons with the advantage of helping them to build their credit scores. When your teens reach adulthood and want to apply for their own credit cards or loans, they may have scores high enough to make them appealing to lenders — all because of your excellent borrowing and repaying actions.
Oh, and after they have their personal accounts, you may want to remove them from your card so they can fly with their own credit wings.
Erica Sandberg is editor at large for Bankrate Inc.‘s Credit Card Guide, advice columnist and reporter for CreditCards.com, and blogger for The Credit Solutions Program. She’s the author of Expecting Money: The Essential Financial Plan for New and Growing Families and host of Adventures with Money, an interview-format podcast which covers all the ways people can live well, no matter how much they earn owe, or own.