Does Adding My Kids To Our Credit Card Help Build Their Credit Scores For Later?

Flywheel Publishing has partnered with CardRatings for our coverage of credit card products. Flywheel Publishing and CardRatings may receive a commission from card issuers.

A lot of people don’t apply for a credit card until they’re old enough to earn money and pay bills. But there may be a whole bunch of credit card users out there who aren’t even old enough to spell their own names correctly.

You can technically add an authorized user to your credit card account regardless of how old they are. This means that if you have a five-year-old child and decide you want to put them on your account, you can do that.

In this Reddit post, a parent is wondering if they should add their teenaged kids to their credit card to help them build a credit history. And the answer is, it’s a tactic that could certainly work. But whether it’s smart to do so depends on the kids.

The upside of adding kids as authorized credit card users

It can be very difficult for young adults to get access to credit. Why so? Many enter or graduate college without a credit history of their own.

But that can lead to a Catch-22 situation. You can’t get approved for a credit card when you have no credit history, but you also need a credit card, or some type of loan, to establish a credit history.

It’s for this reason that some parents opt to add their children as authorized users on their credit cards. And you can technically do this at any age, though many parents opt to wait until their kids are old enough to understand what a credit card is.

When you add a child as an authorized user, your credit history on that card gets added to their profile. That gives them a leg up when they try to apply for their own credit card later on.

A move that could backfire

Adding a child to your credit card account could work wonders for their finances by boosting their credit history. But you’ll need to be careful to avoid getting into trouble.

Once you add a child as an authorized user, they’re allowed to use your credit card. So unless you set clear ground rules, you could end up with charges on that account that you can’t afford to pay off.

If you want to give your kids an allowance on your credit card, do that. But set a spending limit.

And you may want to hold onto some of their money as a deposit of sorts. That way, if they go over their limit, you’ll be able to take their money so they learn not to do that again.

If this seems harsh, well, it is. But think about it this way. If you teach your kids from a young age to use credit cards responsibly, they may be less likely to end up in debt once they venture out on their own.

There are far too many Americans who are saddled with costly credit card debt, and it’s tough to work your way out of that situation. So even if you’re not the type of parent who likes to be strict, it’s important to set limits with your kids in the context of credit card usage and teach them how to avoid getting in over their heads.

Flywheel Publishing has partnered with CardRatings for our coverage of credit card products. Flywheel Publishing and CardRatings may receive a commission from card issuers.

The post Does Adding My Kids To Our Credit Card Help Build Their Credit Scores For Later? appeared first on 24/7 Wall St..