Building Credit History: Adding Your Kids as Authorized Users to Your Credit Cards
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An authorized user (AU) on a credit card is basically someone who has your credit card, but with their name on it. You, as the primary card holder, are still responsible for all of their charges. In other words, they get to swipe and you have the responsibility to pay. There are a variety of reasons why you might open an authorized user card for a family member or very trusted friend. Often, it’s easier for spouses to each have a particular card with their own name on it, which could be accomplished with an authorized user card. Sometimes, adding an authorized user to your credit card account will come with extra perks (either extra bonus points on a welcome offer, extra statement credits, additional lounge access or other perks from having the card).
Today, though, we’re going to talk through a couple of reasons why you might want to add your minor children as authorized users to your credit cards.
Why You Should Add Your Kids as Authorized Users
Adding an authorized user card can help kids who have limited to no credit to start and build their “credit file.” This can allow your young adult child to get access to better credit offers (loans, mortgages, etc.) once they are older. In an increasingly credit-heavy world, having a card in their own name can help them to manage expenses. If you give your kids cash, it may just all get spent without them really knowing where it went. With credit charges, there is a spending track record you can view together.
Giving your children a credit card in their own name helps teach financial literacy while they’re still living in your home and you have the ability and tools to monitor their spending habits. And, of course, every dollar your authorized users spend gives you the same miles and points as if you were the one spending it. Though do be aware that with some banks, authorized users can have access to spending the points, too. For example, with Chase Ultimate Rewards, points can be transferred into the loyalty accounts of an authorized user who is a household member (this may actually be quite handy to top off a child’s airline account to an award threshold). However, you are limited to one person who meets that criteria, so don’t ‘waste’ it on a child if you’d prefer it to be your spouse.
Reasons to Not Add Kids as Authorized Users
While the above points are valid and may be worth considering in your situation, there are also a few reasons why you might not want to add your children as authorized users on your credit cards.
Remember that charges made by authorized users are ultimately your responsibility as the primary account holder. You’ll want to make sure that your kids are mature enough to understand the cause and effect of swiping or entering a card number for a purchase. Note that you can add your child as an authorized user and not actually share the card with them if you don’t think they are ready for the responsibility quite yet. You may also be able to set monthly spending limits for your authorized user — American Express makes this simple online under the card management section of your online account. Some cards charge an annual fee for adding authorized users (that can be hefty with premium cards), so if you’re just using this to help teach your kids about credit and help build their own credit history, use a card that doesn’t charge fees for adding additional users.
If you add your kids’ identifying information as part of the authorized user application (some banks require this; see below), then it will almost certainly go onto their credit report. However, it might end up there even if you don’t provide the SSN based on other identifying information. While this is good news as you likely want them to build a credit history, also know the account on their report will count toward their initial Chase 5/24 status, which is something to note as they approach 18. However, you can have Chase not count authorized user cards towards 5/24 in reconsideration, so it’s just something to be aware of. Depending on how old your children are, this may not be an issue at all.
Also be aware that if you incur negative marks on your credit accounts, it may impact your authorized users, too. If you run into financial trouble, you probably want to remove your children as authorized users to protect their credit history.
Age Requirements for Authorized Users
There is no legal requirement for a minimum age to add someone as an authorized user to a credit card, but different banks and credit card companies have different rules, policies and processes for adding minors to card accounts. In the chart below, we’ll run through each bank’s policy for adding an authorized user. Most banks make it pretty easy to add an authorized user online while logged in to your account, or you can call the number on the back of your card.
|Card Issuer||Minimum Age||Reports to Credit Bureau?||Notes / Sources|
|American Express||13||Yes||Changed from 15 in May 2018|
|Bank of America||18||Yes||There are some reports that the age restriction may not be enforced in all cases.|
|Chase||None||Yes||Only requires name and address|
The above table is for personal credit cards as small business cards typically have their own set of rules. While some banks do ask for the authorized users’ Social Security number, it’s important to note that banks do not pull credit on the authorized user, since the primary card holder is the one who is responsible for making the payments.
And, no need to worry, when it comes time for your child to open his or her own credit card accounts, they can do so — even if they are an authorized user on your account for the same type of card.
There’s no right time or age to add children as authorized users on your credit cards, but now is the perfect time to weigh the pros and cons. Personally, I’ve added all six of my kids as authorized users to some of my credit cards (depending on their age and the issuing bank), though I keep the cards in my credit card binder and most of them probably don’t even know that I’m building up their credit for them. They can thank me when they’re older.
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