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Making them authorized users costs me nothing but sets them up for success.
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My two children are currently three years old and eight months old. Unsurprisingly, they don’t do a lot of shopping independently at this age. But, while they may not have a lot of use for a credit card, they are authorized users on my accounts and both technically have tens of thousands of dollars of credit available to them should they want to go on a spending spree and stock up on Paw Patrol gear.
I did not make my children authorized users on my credit cards to enable them to indulge their fantasy of buying every toy at Costco, though. There’s a very important reason why I added both kids to my account.
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Being authorized users is helping my kids build credit from a young age
When I made my children authorized users, the credit card accounts that I added them to started showing up on their credit reports. In other words, even though they are years away from getting any loans or credit cards of their own, a credit file has been opened up for them.
My accounts are in good standing, with all of my payments made on time. The accounts that I added my kids to as authorized users have been open for many, many years. I have very high credit limits on those accounts, and I don’t use much of the available credit, so there’s a good credit utilization ratio.
These accounts all count toward my kids’ credit history, so as of this moment, their average age of credit would actually be older than they are and they would have great records in all of the key metrics that go toward determining their credit scores.
I intend to keep my kids on my accounts throughout their childhood and into young adulthood. That way, they’ll continue to benefit from having my accounts with a positive history on their credit records for years to come. When they do finally decide they’re ready to borrow for something, like to get their first credit card or a car loan, or when their credit is checked because they want to rent an apartment, they’ll have a strong credit history that opens up doors for them.
It doesn’t cost me anything to do this, since my card allows authorized users for no fee and since my kids aren’t going to start charging things on my cards that I’d have to pay for (at least not anytime soon). So this is an effortless way for me to give them a leg up in their own financial lives.
Should you add your kids as authorized users?
Adding your kids as authorized users can help your children as long as you don’t carry a high credit card balance, which could make it look like they’re responsible for high monthly debts — and as long as you pay your account on time and are responsible with your credit.
You don’t have to give them the physical card if you don’t want them to use it (we didn’t, and we won’t). Just putting their name on the account is enough to reap the benefits of authorized user status, and you can keep the cards sent in their names in a drawer somewhere. Although, you should be aware that if your kids do get access to the card and run up charges, you would be responsible for paying them.
Still, unless you think your kids are going to go wild with your credit cards, you may as well add them if you have an account in good standing that could help them out in the credit-building process.
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The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Christy Bieber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.
