My 4-year-old and 20-month-old currently have around $95,000 in available credit. That's because I made them authorized users on my credit cards. I did this when each of my kids was just a few weeks old, and I plan to keep them as authorized users on my cards for many years to come.
If you are a parent yourself, should you do the same for your own children? Here's what you need to know.
Making your child an authorized user can be pretty easy with the right card
Making your child an authorized user can be as simple as signing into your credit card account and requesting that your child be added to it. You'll just need to provide their name and Social Security number in order to put them on the account.
Some card issuers do impose minimum age requirements for authorized users, often requiring that they be at least 13 years old or sometimes as old as 15 or 16. However, many card issuers have no minimum age limit. This includes my Bank of America credit card -- it allowed me to sign my infant up as an authorized user.
Usually, it will be free to add your child as an authorized user. There are some exceptions, though. If you have certain credit cards with high annual fees, like the Chase Sapphire Reserve®, you'll have to pay extra for each user you add to your account (with the Chase Sapphire Reserve®, each authorized user will cost you $75, but the specific amount will vary depending on the card). You'll probably want to choose a card that doesn't charge you to add an authorized user, since there's no reason to pay when you don't have to.
You can help them build credit by lending them your good payment history
When you make your child an authorized user on your card, the card shows up on their credit record. This means if you have a card that's been open for a long time, they will have a long average age of credit history even if they are very young. If you've paid your card on time every time, they will have a long history of on-time payments. And if you have a lot of available credit and don't use much of it, they'll have a low credit utilization ratio.
Since payment history, credit utilization ratio, and average age of credit history are three of the key factors that go into determining your credit score, your child will have a major leg up when it comes to getting a good score.
My parents named me as an authorized user on their cards and I had a credit score well above 700 by the time I was 19 years old -- and my experience is not isolated, as many others report having the same positive experience.
If you give your kids authorized user status and use your card responsibly, your kids can end up with the credit they need to borrow at an affordable rate as they start their lives. This means they should have an easier time renting an apartment or doing other things that require a good score. This might include qualifying for a cellphone plan or utility services with low deposits.
They'll be able to use your credit cards and you'll be responsible for payments
There is one potential risk of making your cards authorized users. They'll, of course, be authorized to use your card. They won't be obligated to make payments, however -- you'll have to cover the cost of their charges out of your checking account. You don't actually have to give your kids a card, though, or even tell them they're authorized users, so you can minimize this risk.
If you have kids under 18 and a credit card that could help them earn good credit, why not go ahead and make them authorized users today? They'll thank you when they start out adult life with the credit they need to open doors for them.
