money

Credit Cards for Kids: How to Jump-Start Your Kid’s Credit Score

Amy Blacklock

WealthFit Contributor

Did your parents warn you about credit cards? Did they say something like . . . “not til you’re older!” They had good intentions, but there’s a better way to handle children and credit. It’s easy to abuse credit and dig yourself a hole, especially if you’re young. But the solution to financial ignorance is education; not prolonged ignorance. The earlier your kids learn about credit and start building it, the better.

When you think about gifts for your children, you might think about trendy toys, the latest video games, clothes in bigger sizes, or even water park passes and concert tickets. But what about a financial gift setting them up for life? No, we’re not talking big-money inheritances or trust funds. There is a simple, yet often overlooked, financial move that can benefit your children for the rest of their lives: credit cards for kids.

Why You Get Credit Cards for Kids

First of all, this is not about giving your kids access to unlimited funds so they can splurge at any time like their favorite celebrity. This is also not about giving kids money they haven’t earned or can’t repay.

Instead, this is about helping your children build proper credit while they are young. In addition to building credit, credit cards for kids can also teach them about using credit responsibly to avoid costly mistakes later in life.

There are two different strategies you can use to get credit cards for your favorite little ones. Depending on their ages, you can either add them as authorized users on your cards or set them up with their own credit cards.

Adding Children to Cards as Authorized Users

The first strategy to consider is adding them as authorized users on your existing credit card accounts. This means you’re essentially giving your children access to your credit card but in their names. They can then use all the features of the card, but the primary account owner (that’s you!) is responsible for the payments.

Many times, the authorized users inherit the credit history of the account. So, you want to make sure you are adding them to accounts you already manage responsibly.

You may be surprised to learn there are several big-name financial institutions issuing credit cards for young kids as long as they are authorized users. Bank of America, Chase, and Wells Fargo are some of the companies with no minimum age requirement.

You can quickly add your children as authorized users in a few simple clicks. Sign in to your credit card account online and select the add an authorized users option. You’ll then be prompted for your children’s personal information. After processing and approval, they’ll ship off a brand-new card for your child.

Giving Children Their Own Credit Cards

Another way to build your children’s credit history is to help teens obtain their own cards. As the shift to a cashless society continues, more and more families are making this choice. In a 2017 survey, 18% of families reported their children having credit cards.

Your child’s credit card can help establish their credit history fast while teaching them about using credit responsibly and improving their financial know-how.

You can help your teenager apply for their own credit card once they are 18 years old. If your teen has a job, paystub, and an established credit history, they may be able to apply solo. If not, you will need to co-sign for them.

Benefits of Kids Having Credit Cards

As unconventional as it may seem, there are real benefits to credit cards for kids. In general, 15% of anyone’s credit score is determined by the length of their credit history. And credit history is one of the hardest things to build. Even if a young adult is the picture-perfect credit card user, time is not on their side.

Someone with a more established credit history may be more likely to have a higher credit score. With a higher credit score, your children will:

  • Pay less for car insurance premiums
  • Be more likely to be approved for apartment or house rentals
  • Have an easier time qualifying for student loans or a car loan
  • Qualify for lower interest rates
  • Avoid security deposits on cell phones or utilities

That’s a pretty big gift to give.

Credit history is not the only benefit to credit cards for your kids. In addition to building good credit, credit cards for your children can help boost their financial literacy. Credit cards for high school kids offer the opportunity to teach teens about responsible borrowing habits, spending limits, budgeting, interest rates, and debt repayments all before going off to college.

This will certainly give them an advantage over their peers who are opening credit cards for the first time when they leave home for college and are making financial decisions without any input or modeling from their families.

Major Pitfalls to Avoid

It’s true there are some pitfalls to avoid with your children’s credit card. Authorized users can quickly reap benefits from a shared credit history with other cardholders who have joint access to the account. But it can be a double-edged sword since mistakes are also shared.

One user’s irresponsible spending could have lasting consequence for everyone in the family. Even if an authorized user is removed from the account, the original account owner is still left with any damage done.

Another concern is that credit card debt is actually the most common type of debt in the United States. If children and teens have access to credit cards without really understanding the consequences of misusing them, they could face a lifetime of debt.

One way to avoid these pitfalls is to add your child as a user without giving them access to the card. Their credit history will continue to grow, but you can wait until they demonstrate more financial awareness and responsibility before allowing them to use the card.

Other families do not feel credit cards for kids under 13 years of age are appropriate; instead, they opt for prepaid cards until children demonstrate responsible spending habits.

If you and your kids are ready to take the credit card plunge, use these tips to dodge common pitfalls:

  • Work with children to set spending limits so the card balance can be easily repaid.
  • Make sure children understand the importance of quickly reporting lost or stolen cards.
  • Help your kids set up account access through a mobile app to monitor activity within the bank account.
  • Read the fine print. It is important you understand all the terms and conditions of the card.
  • Check credit reports for any errors and to understand you and your children's credit scores better.

Best Credit Cards for Kids

Even if you aren’t ready to add your children as authorized users or give them their own credit cards today, understanding the best options now can help you make educated decisions later. Not all plastic is created equal. These mentioned below are some of the best credit cards available for kids.

The FamZoo Prepaid Card

If you want to keep the training wheels on, there’s an outstanding alternative to credit cards for kids under 18. The FamZoo prepaid card is a strong choice because parents and children both get access to the same account.

With FamZoo, there are different protection features. You can lock or unlock the card and even connect its usage to various chores. For instance, you can use FamZoo to post chores you’ll pay for. Your children can then check the chores off once they’ve completed them and be paid automatically through the FamZoo app.

Another perk of FamZoo that it helps teach kids how to budget at a young age. It accomplishes this via its app, which allows kids to split their money into four categories—spending, saving, investing, and charity.

Not only can kids allocate money responsibly, but parents can also incentivize positive money habits by matching their savings and investing contributions.

Parents can even set up an interest rate and pay interest on savings. Children can then track how their savings grow as a result of the interest they earn.

Discover It Student Cash Back Credit Card

For young adults who are interested in opening their own credit cards, the Discover It Student Cash Back credit card is an excellent option. With no annual fee and an introductory 0% interest rate, it’s a great value for those trying to establish or improve their credit.  

Plus the card only requires a fair credit score, and it offers a range of incentives.

For instance, students can earn 5% cash back at a number of different locations, including gas stations, grocery stores, restaurants, wholesale clubs, and on the Amazon website. Those cash rewards never expire and can be redeemed at any time..

The card also provides incentives for good grades. Students earn a $20 statement credit each year their GPA is above a 3.0. This makes the Discover It card a favorite among college students.  

The Journey Student Rewards Credit Card from Capital One

The Journey Student Rewards Credit Card from Capital One is another option available to individuals with credit scores between 580-699.

Like the Discover It card, this card doesn’t have an annual fee and also offers cash back on purchases. Cardholders start out receiving 1% cash back. However, by paying their credit card bill on time, they can boost their cash back bonus from 1% to 1.25%.

Final Thoughts on Credit Cards for Kids

If you tell someone your to-do list for the weekend includes getting credit cards for your young kids or the teens in your family, they might be shocked. But once an understanding of how credit cards work for kids and the advantages they can unlock, it’s easy to see it can be a smart money move.

Adding children as authorized users or helping them apply for their own credit card can help them build credit fast by getting an early start on establishing their credit history. While also growing their financial literacy. Leading them towards a lifetime of economic benefits.

Share

Written By

Amy Blacklock

Amy Blacklock is the co-founder of the websites Women Who Money and Women's Money Talk, and the founder and blogger behind Life Zemplified.

Read more about Amy

RELATED TRAINING

 in 

MONEY

article
How Do Annuities Work?

Learn everything you need to know about this investment option — including why probably shouldn’t buy one.

How Do Annuities Work?

Amy Blacklock

Read Now
article
Credit Card APR—Everything You Need To Know

Discover everything you need to know about Credit Card Annual Percentage Rates (APR). Plus, learn how to calculate your interest payments.

Credit Card APR—Everything You Need To Know

Amy Blacklock

Read Now
article
11 Rules For Marrying Someone With Student Loan Debt

Learn 11 rules to follow when marrying someone with student loan debt. Don’t let debt ruin your relationship—work towards a debt-free future.

11 Rules For Marrying Someone With Student Loan Debt

Amy Blacklock

Read Now
article
The Ultimate List Of Tax-Advantaged Accounts

Learn how to use 12 different accounts to grow your savings and guard against taxes.

The Ultimate List Of Tax-Advantaged Accounts

Amy Blacklock

Read Now
article
How To Calculate Opportunity Cost: The Hidden Cost Of Every Decision

Learn how to calculate the opportunity cost of any transaction—and find how much you’re really paying. (It’s more than you think!)

How To Calculate Opportunity Cost: The Hidden Cost Of Every Decision

Amy Blacklock

Read Now
article
How To Immediately Lower Your Cell Phone Bill

Odds are you’re overpaying for your cell phone BIG TIME. Learn how to get that bill lowered in just a few steps.

How To Immediately Lower Your Cell Phone Bill

Amy Blacklock

Read Now
article
Your Battle Against Time: How to Conquer Inflation & Rescue Your Retirement Plan

Did you know that inflation can actually ruin your retirement? Here are 6 smart ways you can protect your retirement from inflation.

Your Battle Against Time: How to Conquer Inflation & Rescue Your Retirement Plan

Amy Blacklock

Read Now
article
The Magic of Stock Index Funds: How To Consistently Grow Your Retirement Fund [With Less Risk]

To most people the stock market feels like gambling. But stock index funds have consistently outperformed most actively managed funds.

The Magic of Stock Index Funds: How To Consistently Grow Your Retirement Fund [With Less Risk]

Amy Blacklock

Read Now
podcast
Budgets Are Sexy, Accidental Entrepreneur & The ‘Drama List’

From an accidental entrepreneur to a millionaire blogger, J. Money shares how his decision to get his personal finances in order lead him to build and acquire many successful blogs and hustle money like a pro.

Budgets Are Sexy, Accidental Entrepreneur & The ‘Drama List’

podcast
Redefining Wealth, Emotional Spending & Seeking Wisdom

Tune in as America's Money Maven, Patrice Washington, takes us on a mission to redefine wealth. After the big crash and an even bigger hospital bill, Patrice shares the lessons she's learned on her journey and how she built a successful business by chasing purpose instead money.

Redefining Wealth, Emotional Spending & Seeking Wisdom

podcast
Quit Like a Millionaire

Imagine retiring in your 30's and traveling the world on permanent vacation. Kristy Shen and Bryce Leung live this lifestyle and sit down with Dustin to explain how you can do the same. By going against the norm, investing their money, and quitting their jobs, tune in as they share helpful tips from their new book, Quit Like a Millionaire.

Quit Like a Millionaire

More Cashflow, Less Stress

More Cashflow, Less Stress

How To Boost Your Monthly Income By "Going With the Flow" of Wealth

Dale Gibbons

Watch Now
Financial Adulting

Financial Adulting

The 20-Something's Guide to Debt, Investing, and a Wealthy Life

Ellen & Micah Long

Watch Now
Zero Student Debt

Zero Student Debt

How To Make a Smart College Investment and Graduate Debt-Free

Ellen Long

Watch Now
podcast
unHustling - Work Less, Earn More

Join Phil Newton as he and Dustin discuss how to de-stress your life and achieve work-life balance while increasing your income.

unHustling - Work Less, Earn More

Money 101 for Teens

Money 101 for Teens

The Ultimate Guide To Making, Spending, Saving, and Investing Money

JP Servideo

Watch Now
podcast
Wealth Acceleration

Learn how Stuart Arakelian recovered and prospered from the 2008 financial crash—and how it impacted his philosophy on wealth management.

Wealth Acceleration

Wealth That Lasts

Wealth That Lasts

Simple Secrets to Getting (and Staying) Wealthy

Tom McFie

Watch Now
Getting Out of Debt

Getting Out of Debt

How To Eliminate (Bad) Debt and Maximize Your Cash Flow

Michele & John McFie

Watch Now
Wealth-Building 101

Wealth-Building 101

How to Get Out of Debt, Boost Your Active Income, and Start Investing for Passive Income

Andy Proper

Watch Now
podcast
Timely Tax Benefits, Wealth Preservation & Leverage

Preserve your hard-earned wealth. Learn to use tax advantages to your benefit and leverage trusts with Supreme Court Counselor Lee Phillips.

Timely Tax Benefits, Wealth Preservation & Leverage

podcast
Cutting the Cable

What’s the cable cutting movement all about? Cable Cutting Academy's Jeremy Edmonds discusses tech and finance hacks to save you money.

Cutting the Cable

podcast
How To Negotiate a Higher Salary

Want to boost your salary? Rich Jones and Marcus Garrett help you determine your financial worth. Negotiate for the life you deserve.

How To Negotiate a Higher Salary

The Hidden Power of Life Insurance

The Hidden Power of Life Insurance

How to Protect Your Ass(ets), Save Smarter, and Start Putting Your Money to Work

Stuart Arakelian

Watch Now