Should Your Child Have a Credit Card?
Sixty percent of parents in a recent survey said they have allowed their under-18 children to use their credit card to make online purchases, with nearly 50% regretting it. Nearly half (46%) of parents say their child used their credit card at least once without permission, up from 29% in 2018.
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Should Your Child Have a Credit Card?
Sixty percent of parents in a recent survey said they have allowed their under-18 children to use their credit card to make online purchases, with nearly 50% regretting it. Nearly half (46%) of parents say their child used their credit card at least once without permission, up from 29% in 2018.1
If you’re considering joining the many parents who have provided their children with access to their credit (and avoid the subsequent regret), you may want to consider these key advantages and disadvantages.
The Benefits and Drawbacks
A child under the age of 18 is not permitted to have a credit card in his or her own name. Rather, they can be named as “authorized users” on their parents’ credit card; in fact, one in five (22%) of children already are.2
The advantages of naming a child as an authorized user include:
- This may help establish a credit history, allowing children—in the future—to potentially obtain better loan rates or better benefits when they apply for their own card. There is the caveat that not all credit card issuers report activity of authorized users to credit bureaus.
- They will have access to money in emergencies.
- Doing so could provide important financial lessons about budgeting and spending management, showing that actions have consequences with the bill always coming due.
- Children would be able to shop online independently.
- Purchase protection would be offered, which is unavailable with cash and debit card payments.
There are several major drawbacks, however, such as:
- Parental oversight would be required, which a parent may not have the time or patience for.
- There is the danger of a child running up a high balance, for which the parent is liable—even if the parents cannot afford it.
Parents considering permitting their children as authorized users on their credit card should ask themselves several questions: Can your children follow your rules? Do they understand credit cards? Are you prepared for the downside?
One alternative to giving children use of your credit card is by starting with a prepaid card or debit card—not tied to parents’ checking account—until they prove their spending maturity.
Credit Cards for Children in College
For college-age children, access to a credit card becomes more relevant. They provide the same benefits described above, and are especially valuable for students living away from home. Responsible use can strengthen their rental appeal in their post-college years.
Of course, it does increase the temptation to spend and may hurt their credit rating if they fail to make timely payments. Teaching responsible spending at a young age is pivotal and can make all the difference.
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