While naming your teen as an authorized user on your credit card may sound scary, there are some distinct advantages to this arrangement.
Most credit card issuers let you add an authorized user to your account. This authorized user will receive a credit card with their name on it and can use the credit card just like the primary account holder. All purchases the authorized user makes will be processed against the same account and appear on one credit card statement. They share the credit limit with the primary account holder and purchases reduce the amount of credit available for both users.
Unlike a joint account holder, an authorized user doesn’t have to go through a credit check to be added to the credit card account. Some credit card companies may charge a fee for adding authorized users.
While it’s easy to assume that teens and credit cards don’t mix, adding your teen as an authorized user on your account comes with benefits:
- It’s a matter of convenience
- It can help them build credit
- Emergencies happen
- Teens can learn how to use credit responsibly
Adding your teen as an authorized user is a great way to teach them credit basics — and allow them to start building credit. As they grow up, both of these things will become increasingly important. Meanwhile, your “hand up” could actually give them a leg up when they are old enough to get their own unsecured line of credit, finance a new car, or buy their first home.
The key to making the situation work is setting limits and sticking to them. Furthermore, talking with your teen about credit along the way can help them adopt the right credit mindset.
To add an authorized user, you’ll have to contact your credit card issuer either by phone or by logging on to your online account. The card issuer will need the authorized user’s personal information – name, address, date of birth, and social security number – to process the request.
There may be a limit to the number of authorized users you can add to your account. And it’s for the best – the more people with access to your credit card account, the harder it is to keep track of the account.
This article was based on an article on The Simple Dollar and I strongly suggest you go there to read more about this idea.