Should Your Student Be an Authorized User on Your Credit Card?
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- Authorized users can make purchases and build credit with a card linked to your account.
- Authorized users are not responsible for the account balance or for making any payments.
- If your student is eligible for their own credit card, consider that instead.
- You may not want to add an authorized user if you have credit card debt.
Building a credit score is an important stepping stone to financial independence. But many young students don't have the credit history they need to make big purchases, lease apartments, and get credit cards of their own. Adding your student to your credit cards as an authorized user is an easy way for them to begin building their credit score. For some cards, you can add your children regardless of their age.
Authorized users can piggyback off the credit you build from that account without making any purchases or payments of their own. When deciding whether to add your student, consider their financial responsibility, your financial profile's health, and whether they can acquire a card of their own.
What Is an Authorized User on a Credit Card?
An authorized user is an additional cardholder on a credit card account. The person who creates the account is considered the primary cardholder.
Authorized users will receive a credit card with their name but are not responsible for the account balance or making any payments.
Basically, there's one account for both users, and the primary cardholder is considered the owner. An authorized user has a key to access that line of credit.
A primary cardholder can choose to add anyone to their account as an authorized user. Authorized users are typically family members, partners, or other members of your household.
Reasons Your Child Should Be an Authorized User on Your Credit Card
Adding your child as an authorized user can be a great idea for many families. We recommend considering this strategy if your child can't get a credit card on their own, needs to improve their credit score, or could use some guidance with money management.
1. They May Not Be Approved for a Line of Credit on Their Own
Without any credit history, many banks and credit unions won't approve any form of credit, including credit cards, for young people.
It can feel like a Catch-22 — you won't be approved for a credit card without a credit history, but you can't build a credit history without a credit card. And if students can get a credit card without any credit history, there's likely a very high interest rate.
If your student is under 18, they legally aren't allowed to sign a credit contract. And some banks won't lend to people under 21 unless they can provide proof of a steady income. Adding your teenager or young adult as an authorized user on your credit card is a great option until they can be approved for their own.
2. They Need to Build a Credit Score
There is quite a bit you can't do without a credit score, like getting a car or personal loan. Many apartments run a credit check and won't lease to people without a credit history. In those cases, some property managements will allow parents to co-sign on the lease, but many places won't approve rental applications without a strong credit score.
Adding your student as an authorized user is a great way to help them build a credit score before those big life purchases come into play. And you can start building credit for your child as early as you'd like. Because your purchases on the account will count toward their credit history, your student doesn't even have to use the card to build credit.
High school can be a great time for students to begin practicing financial literacy and earning credit. If they have an established credit score, they could also earn a lower student loan interest rate when it comes time for college.
3. They Could Benefit From Supervised Money Management
Adding your student to your credit account is a great opportunity for them to learn about managing money while still living with some healthy parental supervision. With a credit card on your account, you can teach your student about personal finance, responsible borrowing, and debt management.
If they're leaving for college soon, these lessons can be imperative as they approach financial independence.
Reasons Your Child Shouldn't Be an Authorized User on Your Credit Card
While adding your child as an authorized user is often a great idea, some circumstances might make it a complicated choice.
1. They're Irresponsible With Money
If you aren't in a place where you can trust your child with a line of credit or they've proven themselves to be irresponsible with money — it may not be the best idea to add them to your account. As an authorized user, their spending behavior would impact your credit score.
That said, you could add your student as an authorized user without physically giving them the card until they prove financial responsibility. They'll still earn credit history for your purchases without any liability to your own credit score.
2. You Have a Bad Credit Score or a Lot of Debt
If you're still working toward a healthy financial situation, it may not be a good idea to add your student to your account. Your debt ratio and how you use that credit card will also impact their credit score.
Missing a payment or carrying a large balance will reflect on your authorized user's credit history, too.
And if you're working on paying off credit card debt, you may not want to risk your student's financial behavior further impacting your credit score.
3. They Can Qualify for Their Own Credit Card
If your child has demonstrated financial responsibility and can get their own credit card account —you may not need to add them as an authorized user. Acquiring various credit accounts as a primary account holder can impact their credit score more than simply being an authorized user.
How to Add an Authorized User to Your Credit Card
It's typically a pretty simple process for the primary cardholder to add an authorized user to their account. You can call your bank, do it online, or use your bank's mobile app. You'll need some information about your authorized user — like their full legal name, Social Security number, date of birth, and address.
There isn't an approval process for an authorized user, so you won't need to wait for the bank to review an application. The bank will mail you the credit card for the authorized user shortly after adding them to the account.
Adding an authorized user to your credit card is usually free, but some banks charge an annual fee.
Frequently Asked Questions About Adding an Authorized User to a Credit Card
What's the minimum age to be an authorized user on a credit card?
There is no legal minimum age for authorized users, but some banks may have their own minimum age policies.
For example, American Express requires children to be at least 13 years old to be an authorized user on some cards. Other banks like Chase and Capital One have no minimum age requirement. The earlier you start, the more time your child has to build up a healthy credit history.
Does adding your child as an authorized user help their credit?
Yes. Building credit is the main advantage of adding an authorized user to your account. Authorized users don't require a credit check to add them to your account, which means you can add your children regardless of their credit history. It's a savvy credit-building tactic and a great starting place for young students.
Can an authorized user hurt my credit?
Simply adding an authorized user to your account will not impact your credit, but how they use the card can. If your authorized user is responsible with the card and you make regular payments, it can benefit your credit. If your authorized user overcharges and racks up debt, it could hurt your credit.
Is it better to have your own credit card or be an authorized user?
Having your own credit card can impact your credit score more than being an authorized user. If you can, opening your own accounts will benefit your mix of credit history. You'll build a credit score as an authorized user, but your long-term financial plans should also include acquiring your own line of credit.
