Should You Add Your Child to Your Credit Card Account?
Good parents are continually seeking ways to improve the opportunities and security of their children. As a child enters early adulthood – beginning to drive and travel on their own – having access to a credit card can help provide a safety net in case of an emergency. However, giving credit card access to an untrustworthy child can create a financial emergency of its own.
Therefore, the question is raised, should you give your child access to your credit card?
The Benefits of Providing Your Child with a Credit Card
By adding your child as an authorized user on your credit card, you are able to provide multiple benefits to your child.
Your Child Learns How to Manage Credit
The sooner you can begin teaching your child how to manage debt and credit, the better off they will be. It is far better for your child to make a $50 financial mistake by purchasing one too many shirts, than to make a huge mistake a few years later by purchasing a car that he cannot afford. If your child has access to a credit card (with a very low limit) earlier on, you can help him learn how to manage his credit and assist if an emergency arises. Of course, if your daughter continues to max out the credit card on shopping sprees, it would be wise to revoke her access.
Your Child Has an Additional Safety Net
We all lead busy lives these days. If your child finds himself out of gas 20 miles from home, and is unable to get in contact with you, a credit card will give him the ability to fill up and make it back home – without inconveniencing you or putting him at risk of getting into trouble. If you can trust your child to only use your credit card in times of emergency, in school trip, vacation with friends, or long road-trips to college will maintain an additional level of safety and security.
Your Child Can Improve Her Credit Score
Although FICO has reduced the impact that being an authorized user has on someone’s credit score, your child’s credit can still improve from being associated with your good credit. By adding your child to an established credit card account that you have, you can benefit your child’s future – making it easier for him or her to start off life with a glowing credit of their own.
The Drawbacks of Making Your Child an Authorized User on Your Credit Card
Before rushing to your financial institution to beg them to provide your child with a credit card, take a moment to consider the negative implications that can come from providing your child with access to your credit.
Your Child Can Put You in Debt
Remember that credit card with a $20,000 credit limit? If you give an untrustworthy child access to that credit card you could find yourself with an Armani clad teenager and a home in foreclosure. Make sure that you trust your teenager, monitor the card closely, and provide access to a card with a low credit limit in order to protect yourself from devastating headaches.
Your Child Can Hurt Your Credit Score
If your son spends more on the card than you can afford, in addition to putting you in debt, it can also hurt your credit score – making it more difficult to borrow for a car or home. Therefore, be very hesitant about giving your child access to your credit card right before making a big purchase that will require an excellent credit score.
You Can Hurt Your Child’s Credit Score
If your daughter is better at managing her money than you are at monitoring your own, it may be better for her to not be added to your card. If you have a bad credit score, being overly associated with your accounts can actually make it more difficult for your child to build a healthy credit rating.
Your Child May Fail to Learn How to Save
For wealthier parents, a credit card may take the place of an allowance. And although it is very thoughtful of you to want to help your child enjoy their youth, if you give them full rain to purchase whatever they desire, they may never learn the true value of money. Of course, if you are leaving them a massive inheritance, and you want them to be dependent on you forever, this may not be a big deal. However, for those who want their kids to learn how to make it on their own, this babying is unhealthy and harmful.
Making the Decision
Only offer your child access to your credit card if you can trust him, if you have made clear guidelines as to when and how the credit card can be used, and if you are able to regularly monitor the use of the card. It may even be beneficial to receive immediate text or email alerts when a large purchase is made. Ultimately, unless giving your child access to your credit card fails to make both of your lives more convenient, you should avoid it.
Making your child an authorized user on your credit card can be a big step in helping your child to become a responsible adult. But it can also enhance the lack of self-control that many teenagers already embrace. Therefore, seriously examine the benefits and consequences of giving your child access to your card before making the final decision.