Can I Open a Credit Card for My Kid?

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When your children are young, it can be impossible to imagine entrusting them with a credit card. Yet eventually, they’ll reach the age where they will need to make their own purchases without you. It could be a movie ticket, lunch with friends, or a few items on your grocery list, but the time will come when you will want your child to have his or her own credit card.

Strictly speaking, parents cannot open a credit card account for their minor children. Only a person age 18 and over can enter into a legally binding contract, which includes applying for a credit card as the primary account holder. Plus, thanks to the CARD Act, borrowers under 21 need to demonstrate an ability to repay or have a willing co-signer. 

Nevertheless, most credit card issuers allow minors to be added as authorized users to an adult’s credit card account. American Express, for instance, allows parents to add children 15 years and older as authorized users to an existing account, a spokesperson confirmed. You can call your specific issuer to ask about their requirements. 

What’s an Authorized User?

As an authorized user, you child will receive a credit card with his or her name embossed on it. They will be able to use the card to make charges to your account, but they generally won’t have any other privileges that primary account holder has, such as adding other cardholders, closing the account, or redeeming rewards.

Furthermore, authorized cardholders are not responsible for repayment of debts. The primary account holder is always responsible for the payment of all purchases, interest charges and fees. However, you account will likely appear on your child’s credit report, which can help them to establish good credit at a very young age. (Again, ask your issuer if they report their authorized users to the credit bureaus, particularly if your aim is to help your child build credit.) 

Before Adding Your Child to an Account

When you add your child as an authorized cardholder on your account, you are granting him or her significant purchasing power as well as serious responsibility. On one hand, your child will be able to make charges to your account, just as you can. This can offer parents peace of mind as their child can always pay for a meal or a taxi in case of an emergency.

But before handing your child a credit card, you need to be assured that it won’t be used for purchases that you did not, or would not approve of. An expensive surprise is the last thing that parents want to see in their credit card’s monthly statement. Plus, high credit card balances can damage your credit score. (You can see where your credit currently stands by viewing two of your credit scores, updated every 14 days, for free on Credit.com.)

Teaching your Child to Use Credit Responsibly

Given the benefits and risks of credit card use, it’s not a good idea to just hand your child a credit card without teaching him or her how to use it responsibly. Instead, it’s important to take the time to slowly introduce your children to the concept of credit card use long before the receive one.

For example, you can start teaching your children from a very young age the basics of how credit cards work. Kids watch their parents use credit cards to make purchases, which can seem almost like magic. But children must also be taught that each charge must eventually be paid for using the money earned at work. Just as children watch their parents make purchases, it’s important to show them how you pay your credit card bills.

Later parents may wish to give their children a prepaid debit card or a gift card to use for specific purchases. You can load the card with money from your child’s allowance or savings, and give him or her some choice of how to spend it. (This can be a good plastic primer, but, be aware, prepaid debit cards and gift cards don’t build credit.)

Eventually, parents may want to order an additional credit card from their account for their child’s occasional use. For example, you can give your child the card to make a specific purchase, and ask for it back afterwards. You can even enter into an agreement that they can make charges of their own, so long as they notify you in advance, and pay you back from their savings or allowance.

The Bottomline: You can’t open a credit card account for your kid, but you can allow them to use a card that’s attached to your’s. By slowly introducing your children to the benefits and risks of credit card use, you can give them the purchasing power they need while teaching them valuable lessons at the same time.

At publishing time, American Express products are offered through Credit.com product pages, and Credit.com is compensated if our users apply and ultimately sign up for these cards. However, this relationship does not result in any preferential editorial treatment.

Note: It’s important to remember that interest rates, fees and terms for credit cards, loans and other financial products frequently change. As a result, rates, fees and terms for credit cards, loans and other financial products cited in these articles may have changed since the date of publication. Please be sure to verify current rates, fees and terms with credit card issuers, banks or other financial institutions directly.

 

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Can I Kick My Parents Off Our Credit Card?

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Sometimes, removing your name from your parents’ credit card (or vice versa) has its advantages. For starters — it’s kind of nice to handle your own bills without getting the glowering stink eye about your spending sprees on the card’s statement. And while you’re on the card, your credit is generally linked to your parents’ credit, so if your parents are irresponsible, you’ll look irresponsible too, said Eric Lindeen, vice president of marketing for ID Analytics in San Diego, California.

“It can be a great financial head start to be listed on a parent’s card, but [it] can become awkward or damaging if their credit isn’t sterling,” he said.

To get an idea of how your parents’ card use may be affecting your credit, it’s a good idea to check your credit report. That’s because if your name is listed on a shared credit card account, the good and bad habits of all users can show up on your credit report.

“It should be easy to spot problems and decide if you should remove yourself from the card,” Lindeen said. “A horrible card will be less than a year old, maxed out, with multiple late payments.”

You can pull your credit reports for free each year at AnnualCreditReport.com. You can also watch for changes by viewing two of your credit scores for free every 14 days on Credit.com. If you ultimately decide it’s time to go your separate credit ways, the next steps vary, depending on how the account is shared. Here’s a rundown of your options.

1. If You’re an Authorized User on Your Parent’s Card

You can breathe a huge sigh of relief if you’re an authorized user, because you’ll have no responsibility for repayment of the credit card’s debt, according to Rod Griffin, director of public education at credit bureau Experian. If you want to come off the account, call the card company to learn its policy for removing your name. It normally only takes a call to remove authorized users, although the issuer may request a letter, or for the person responsible for the account to contact them directly, which could admittedly get awkward.

“The biggest challenge in a situation like this is having the conversation with the parent (or more often, the child) to explain the action. We can hope they accept graciously,” said Lindeen.

In addition to contacting the card issuer, you should also get in touch with the three major credit reporting agencies to have the account removed from your credit report.

“Experian will remove authorized user accounts from the credit history upon request,” said Griffin. This step is particularly important if your parents’ credit card habits are a little irresponsible.

You can go here to learn about disputing errors on your credit report.

2. If Your Parent Is an Authorized User on Your Account

Let’s say you were helping your parent rebuild credit by adding them as an authorized user to one of your accounts, but the process has gone awry: You can call to have them removed from the account. However, keep in mind, while this removal can prevent future problems, it won’t eliminate any black marks mom or dad have already added to your credit report.

“An authorized user can definitely damage a primary cardholders’ credit report, as the primary cardholder assumes all responsibility for the [authorized user’s] activity,” said Sukhi Sahni, director of communications and marketing public relations for Capital One.

In other words, as a primary accountholder, you’re considered liable for the debts your parents may have run up — and, if those debts caused you to miss any payments on the card, you’ll have to wait for those to age off of your credit report.

3. If It’s a Joint Account

If you are a joint accountholder on the card in question, you can move to have the account closed. Either party can unilaterally close the account by contacting the card issuer over the phone or in writing. Once closed, the cards of both joint account holders and any authorized cardholders will be deactivated, and any future attempt to make purchases will be declined. But both parties are generally still considered on the hook for any debt remaining on the card. And, yes, those debts and/or missed payments will likely appear on your credit report until they’re paid down or age off, respectively.

 

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