No income, no assets, to young to vote. You wouldn’t think kids would have much access to credit.
But many parents are willing to add children to their own accounts as authorized users. And according to a new survey, more of them are doing it.
A way to build credit, or to ruin it?
Supporters of allowing kids to carry their own credit cards say it helps them build their credit history with companies like Experian and TransUnion. But if you don’t pay the bill, or can’t, you could end up ruining their credit as well as your own.
And it’s hard to hand a child something that looks like instant, consequence-free fun and freedom and know they’ll only use it for emergencies, or purchase they ask you about.
You could easily end up with more debt than you can handle.
Not the First Step
Before adding your child to your credit cards you might set them up with a debit card first, so you can see how they spend their money.
Evaluating whether they blow it all on frivolities in a single day or whether they marshal the resource carefully can tell you a lot about how they’d handle your credit card.
Financial troubles of your own?
If you’re having trouble paying your bills you should immediately remove your children as authorized users on the card so their credit won’t develop any problems. And you should definitely do it before you file for bankruptcy.
If you forget the bankruptcy still shouldn’t end up on your child’s credit report, but it can stop your child’s credit score from falling while you’re trying to resolve the bankruptcy.
What if it’s the other way around? What if you’ve made an adult child an authorized user on your card, only for the child to declare bankruptcy?
Not to worry: an authorized user’s bankruptcy can’t impact your own credit report.
One More Caveat
Credit card companies like it when you make children an authorized user because it builds brand loyalty. Adding them to your card might well build a habit of using credit, instead of using the money they have in hand.
And while the responsible use of credit can be very beneficial, any credit situation can spiral out of control quickly.
If you want your children to understand finance, giving them cash, not a card, might be the best way to go.