Adding Your Child as an Authorized User: What Parents Should Know

You've likely heard of adding a significant other, family member, or good friend as an authorized user to your credit card. Adding them as someone who has access to your line of credit and can make purchases with your card can help them establish credit.

If you're wondering: Can a minor build credit as an authorized user? The answer is "yes." While it might be less known–and talked about–recent data from LendingTree reveals that 59% of parents have given their children permission to use their debit or credit card.

Besides passing on your hair color or love for sports, if you add them as an authorized user, your child can also "inherit" your good credit.

Here, we'll walk you through what it means to add your child as an authorized user to your credit card, the potential benefits and drawbacks, and tips on how authorized users can use their privileges responsibly.

Can a Minor Build Credit as an Authorized User?

When you add a minor as an authorized user, they can make purchases on your credit card. A child can be added to your card as long as they check off two boxes: they meet the credit card issuer's minimum age requirements, and, as the primary cardholder, you give approval.

As long as you practice responsible card-carrying habits, such as making on-time payments by the monthly due date and not racking up a balance–which can hurt your credit utilization ratio–it can help your child establish good credit.

That's because once they're added to the account or turn 18, the entire account history of the card gets added to their credit reports. So instead of needing to build credit from scratch on their own, they get a bump in their score.

Benefits of Adding Your Child to a Credit Card

Before deciding whether it's a good idea to tack on your child as an authorized user on your card, you'll want to assess the pros and cons. First, let's look at the benefits of adding a child to a credit card:

• Helps establish credit for future financial milestones. Probably the biggest plus of adding your child to a credit card is that it helps elevate their score. So instead of having to start fresh with a thin credit profile, you can help them be on solid footing financially.
• Strong credit helps elevate their purchasing power as they get older. When buying a car, applying for a mortgage, or getting a credit card, they'll have an easier time getting approved and qualifying for low interest rates and more flexible terms.
• Teaches responsible credit habits. Making them an authorized user doesn't necessarily mean they get to use your credit card to make purchases, but it can be a valuable learning tool to teach them how credit works and how to use a credit card with care.
• Acts as a financial safety net. Should there be an unexpected emergency that seemingly comes out of the blue, your child could potentially tap into the credit card and cover the expense.

If you let your child use your card, it's important to lay some ground rules and expectations–which we'll get to in just a bit.

• Can earn rewards. While ideally, your child won't be racking up much of a balance on your card, if your card offers rewards, the purchases they make can add to your rewards points. These points typically can be redeemed for travel, cash back, gift cards, or other perks.

Potential Risks and Downsides

Now, let's go over the potential negatives of adding your child to a credit card:

• Negative impact on your child's credit if mismanaged. While you can help your child establish solid credit and give them a financial lift, on the flip side, if you don't manage your credit properly, it could have the opposite effect. Falling behind on your credit card payment due dates, raising a high balance, or decreasing credit limits could hurt their credit.
• Possibility of overspending and creating bad financial habits. Giving your child the ability to use your credit card to purchase things could spiral into a cycle of making unnecessary purchases and overspending, ultimately leading to poor financial decisions and habits.
• You're financially on the hook for the charges. As secondary account holders, authorized users can get their own credit card but are not liable for any charges. It's the primary account holder's responsibility to cover the payments.

How to Manage Authorized User Accounts Responsibly

• Set clear spending rules. If you add your child as an authorized user to your credit card and give them access to make purchases on the card, you must set clear spending rules. For purchases over X amount, they'll be required to run it by a parent.

Besides needing to adhere to the spending limit on the card, depending on the card issuer, you might be able to set a specific spending limit. Besides spending limits, make it clear who is financially responsible for covering the purchases.

What types of transactions can they put on the card (i.e., school supplies, after-school snacks with friends), and will they be responsible for paying you back for certain types of purchases by, say, doing chores?

• Monitor the account closely. Keep a close watch on your account to make sure overspending doesn't happen. You can set notifications on all transactions made with your card.

Plus, some cards let you view authorized user activity. For example, for each in-store purchase, they make using the card as an authorized user, you'll be able to see their initials next to the transaction on your billing statement. Other cards might let you see which authorized user made which purchase online and by checking monthly billing statements.

• Be a responsible cardholder. As mentioned, your child will only benefit from your positive, responsible card behavior. If you do the opposite, fall behind on payments, and carry a high balance on your card, it could hurt your child's credit instead of helping it.
  
  
• Use it as a teaching tool for financial literacy. Avoid the horror stories of credit card use gone wild. Instead, consider sitting down with your child and showing them how a credit card works and what it means to be a responsible, authorized user.
  
  

If you give them the ability to put purchases on your card, show them dos and don'ts on responsible card use–such as adhering to spending limits or only making certain purchases.

If you want to take things a step further, you can use a budgeting app for your family and track spending on your credit card. That way, you can weave lessons on managing money and how responsible credit card use plays into budgeting and financial wellness.

• Know when to take them off as a user. If you are not responsible with your card use, your child won't benefit from your credit history. In fact, it can hurt their credit situation. In turn, removing your child as an authorized user is probably best.

Making the Right Decision for Your Child's Financial Future

Adding your child as an authorized user to your credit card can help elevate their credit and be a valuable tool to show them the ins and outs of financial literacy. However, you'll need to feel comfortable and confident you'll be able to practice responsible use and set boundaries and spending rules.

Before taking the time, you'll want to weigh the pluses and minuses of going this route based on your child's readiness for financial responsibility and your ability to set expectations, boundaries, and rules.

Ultimately, it boils down to what's best for your child's financial future and making the right choices to benefit them in the long run.

Frequently Asked Questions (FAQs)

When should you stop being an authorized user on a credit card?
You should remove yourself as an authorized user on a credit card if the primary account holder is not responsible for their credit card use.

For example, if they are falling behind on payments or are racking up a balance, it can negatively impact your score. You can also stop being an authorized user on a card once your credit is strong enough to apply for a card on your own.

Why did my credit score drop when I was added as an authorized user?
Your credit score could decrease when you were added as an authorized user because the primary cardholder did not demonstrate responsible usage of their cards. For instance, they might have fallen behind on making payments by the due date or have a high credit utilization ratio.

How much will my credit score increase if I become an authorized user?
It's hard to determine exactly how many points your credit score will go up if you are added as an authorized user to someone else's credit card. That's because it depends on a number of factors, such as the primary cardholder's current history, plus their financial behavior.

About the author

A personal finance writer for over 8 years, Jackie Lam covers money management, lending, insurance, investing, and banking, and personal stories. An AFC® accredited financial coach, she is passionate about helping freelance creatives design money systems on irregular income, gain greater awareness of their money narratives, and overcome mental and emotional blocks.

Her work has appeared in publications such as Bankrate, Time's NextAdvisor, CNET, Forbes, Salon.com, and BuzzFeed. She is the 2022 recipient of Money Management International's Financial Literacy and Education in Communities (FLEC) Award, and a two-time Plutus Awards nominee for Best Freelancer in Personal Finance Media. She lives in Los Angeles where she spends her free time swimming, drumming, and daydreaming about stickers.

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