Should you add your teen to your credit card?

SUMMARY:

The thought of adding your teen to your credit card might send you running for the hills, right?  Of course, this very topic is being discussed all over the US, probably right now.  

After you finish reading this, you will have a MUCH more informed idea of whether that makes sense at your house.  No fears!

What is an "authorized user" on your credit card?

It simply means that you add your teen as a person that can put charges on your account.  

Why would you consider adding them?  

I know.  I know.  You are thinking to yourself "I must be out of my mind if I do this." And yet, here are reasons why this might make sense for your house.  

1. In a small way, this move might help them establish a credit history.  There are other ways to do this, but some parents choose this path.  
2. You might need your teen to buy things on a regular basis on your behalf.  For instance, they may be able to drive and pick up groceries on the way home from school.  
3. You might consider adding them as a convenience for your house in general.  If they drive, and you don't want them carrying large amounts of cash to pay for gas, perhaps a credit card authorized user might be something to consider.

Who is obligated to pay for the charges on their card?  

YOU ARE.  Will they have their own card?  Yes and it might have an extension number on it to differentiate it from your card number.  Some cards do, some don't. 

Either way, you are legally responsible for the bills.  Does this mean that you can't hold them accountable to paying YOU for THEIR charges?  Of course not.  In fact, that could be part of their learning process.  

Before you jump on the "authorized" bandwagon, consider 3 things:

1. Do you pay your card on time?  If not, not only will you affect your credit scores/report, you might very well be affecting your teen's credit history, too.
2. Does your credit card company allow and report an authorized user to the credit bureaus (Experian, Equifax & TransUnion)?  If not, then adding them to your card to begin establishing credit won't work.
3. Transaction charges you make and those your teen makes could possibly be all co-mingled making it difficult to double check for correct charges on your statement.  Bonus Tip:  If you have two different cards, and you don't use one frequently, then perhaps that is the card you might want to add your teen too. It will make confirming all charges much easier.

With every privilege comes responsibility!

There are 3 Systems we encourage you to consider setting up:

• How will your child check their charges for accuracy?  How will you make sure that happens?  (remember, this affects your credit ratings, too!
  • So go ahead and set up a system that happens weekly or monthly for them to make sure all things are working properly with this. 
  • We suggest a Sunday night review system.  If YOU check yours, you are modeling a lifetime skill they need to adopt!
• Have you set up a system for them to check their credit reports/scores?  Now is a time to introduce this to them.  
  • NOTE:  this is more difficult to do because they are minors.
  • We covered exactly what/where and how to do this here.
• Set up guidelines.  Write them down and both of you sign it.
  • When and how can they use this card?
  • What will happen if they don't follow your guidelines?
    • penalty, card privilege revoked?
  • Do they get your permission before each charge?  Certain charges?
  • Do they understand what a credit limit is?
  • Note:  As charges on your card climb toward your limit, your credit scores could go down.  I know.  That's counter-intuitive.  More on this at another time.

There is SO much to consider, but I know these are concepts you will want to think about before jumping on the authorized user bandwagon.  

We certainly hope this has helped clear up some of the myths involved.  Remember that laws, credit card companies, and credit bureaus are always subject to change.  Double-check how YOUR credit card company works with this information as a guideline.

Have a wonderful week.

You CAN Have Success in the Middle of it ALL

 The JellyGeneration Team