Parents Give Your Child a Head start by Doing This-
Add Your Child to Your Credit Card
Date: October 25, 2023
Adding an adult to your credit card to help them build up their credit is far from a novel idea. It’s been circulating on the internet for years, with numerous articles discussing this strategy. However, let’s shift our focus from adding adults to exploring the concept of adding children to credit cards.
TikTok
TikTok, a popular social media platform, serves as a means to connect with friends and family and share content. Interestingly, there are countless TikTok videos offering advice on how parents can enhance their children’s financial future. One video, captioned “The goal is to build generational wealth,” suggests a smart strategy: “If you have a kid and a credit card, do this: add your kid as an authorized user and pay the bill on time. By the time they turn 18 — boom: 800 credit score ready for their success.”
It’s undoubtedly valuable advice, but always remember to conduct your own research before diving in.
In the United States, specific credit card companies permit parents to designate their children as authorized users on their credit accounts. This means that either when the child reaches 18 (depending on the particular credit card company’s policy) or as soon as they’re added as authorized users, the entire account history becomes a part of their credit report. As long as they avoid accumulating high balances and missing payments, this practice can genuinely aid minors in building a robust credit history.
Various credit card companies have different policies. For instance, Discover and American Express set specific minimum age requirements for authorized credit card users, while companies like Capital One and Citi allow children of any age to become authorized credit card users.
Social Proof
The TikTok user who talked about “generational wealth” is not the sole advocate of adding a child’s name to credit card accounts. TikTok is teeming with influencers who firmly believe that permitting minors to use their parents’ or older family members’ credit cards can pave the way for a prosperous future. Many videos on the platform carry the hashtag #generationalwealth, implying that authorizing minors on credit cards is a kind of secret technique employed by the affluent.
https://www.tiktok.com/@mastermoneyco/video/7221253077003701547
https://www.tiktok.com/@yourfinancialstrategist/video/7174205257889631534
Lawrence D. Sprung, founder and lead wealth advisor at Mitlin Financial, is among numerous American parents who’ve opted to add their children as authorized users on their credit cards. He believes it’s a valuable way to introduce children to the world of credit and educate them about how it functions.
In his interview with Fortune, a prominent media organization, Sprung revealed that his children became authorized users as soon as the credit card company allowed it. When his eldest entered college, he successfully obtained a credit card in his own name, thanks to his prior experience as an authorized user, which played a significant role in building an impressive credit history.
According to Sprung, this experience served as an effective teacher for his son, imparting valuable lessons on understanding credit cards and stressing the significance of paying the bill in full, and using the card solely for expenses he could comfortably cover by the end of the month.
Ganesh Pandit, an accounting professor at Adelphi University, has also allowed his children to become additional users on his credit card. Nonetheless, he focuses on the meaning of guardians assessing their singular conditions, as he believes that “not each of the 15-or 18-year-olds display an equivalent level of monetary obligation.”
A Word of Caution
While adding children to your credit card(s) is sound advice, it’s imperative to ensure that you’re teaching your child how to manage their finances. Failing to do so can be a recipe for disaster, exposing them to financial risks. It’s important to remember that if you ever face financial hardship and can’t make the payments, both you and your child’s credit could be affected.
