There are numerous ways to support your child’s financial stability and make their life easier. As they become more independent, they’ll almost inevitably enter the banking system looking for different financial products.
The problem is that your child might struggle to borrow from banks even if they’re a legal adult. To give them a helping hand, you may wonder—“Can I co-sign for a credit card for my child?”
While co-signing is technically possible, you may run into various roadblocks when trying to open an account with your child. This guide will explain why this is the case and if co-signing is a good idea in the first place. You’ll also discover additional ways to support your child’s credit journey and set them up for a more stable future.
Why Your Child Might Need a Co-Signer (And Who Can Be One)
Before approving any loans—including credit cards—banks look at the applicant’s financial stability and credit history. Teens and young adults typically don’t have a stable income or a payment history that would result in a strong credit profile, which makes them risky borrowers and prevents them from obtaining credit cards independently.
This problem was intensified by the CARD Act of 2009, which doesn’t allow banks to issue credit cards to young adults under 21 unless they show an independent ability to repay the debt. If this is the case with your child, they need a co-signer with good credit who can vouch for them and assume responsibility for the card.
A co-signer can be anyone able and willing to make payments instead of the primary owner—including a parent. So yes, you can legally co-sign your child’s card to improve their chances of getting approved. Still, this option might be unavailable regardless of the CARD Act’s green light.
Why Co-Signing for a Credit Card for Your Kid May Not Be Possible
There are two reasons why you may not be able to co-sign your child’s credit card:
- Their age
- The bank’s regulations
Minors can’t apply for credit cards at all—with or without a co-signer. Your child must be of legal age in your state to qualify for any loan.
Even if your child is a legal adult, co-signing might not be an option because many banks don’t support it. This includes the largest financial institutions, such as:
- Bank of America
- Capital One
You’ll have to do thorough research to find a lender that supports co-signing. When you do, you should weigh the pros and cons of this option to ensure you’re making a wise financial decision.
Should You Co-Sign Your Child’s Credit Card?
Source: Andrea Piacquadio
Co-signing can be a solid way to let a child leverage your credit score and financial stability until they have their credit profile and the financial resources to obtain their own independently. Besides increasing their chances of getting approved, it could also secure a higher credit limit and more favorable terms.
While these benefits sound appealing, they come at a cost. Being a co-signer carries significant risks, so it’s not a decision you should take lightly.
Co-signing the account doesn’t give you ownership of that account—it only means you’re willing to repay your child’s debt if they’re unable to. This means you can’t control your child’s credit card use or ensure they meet their obligations toward the lender. If your child doesn’t have adequate credit card knowledge and spending habits, they might expose you to significant debt.
Such debt will not only put pressure on your personal budget but can also damage your credit profile. Missed payments, excessive credit utilization, and similar red flags might show up on your report and hurt your chances of obtaining future credit.
With this in mind, you might want to look for other ways to support your child’s financial independence.
Alternatives to Co-Signing A Child’s Credit Card
Parents typically co-sign their children’s cards for two reasons—to give them access to additional funds and to help them build credit. Depending on your goals, you can explore a few options beyond co-signing:
- Getting your child a prepaid card
- Helping them get a secured credit card
- Adding them to your credit card as an authorized user
Should You Get a Prepaid Card for Your Child?
Source: Karolina Grabowska
If you want your child to move away from cash, getting them a prepaid card can be a smart move. You can load a specific amount of money onto the card, ensuring your child doesn’t overspend.
Many prepaid cards don’t have age requirements as the parent can control them through a dedicated app. If your child is a minor and has only started learning about financial management, you can use the card to help them practice healthy spending behavior.
Note that prepaid card activity isn’t reported to credit bureaus, so your child can’t establish or build a profile with it.
How To Help Your Child Get a Secured Credit Card
If your child is a legal adult but still doesn’t qualify for a traditional credit card, they can start with a secured one. Secured credit cards are easier to obtain and can help them build credit the same way as unsecured cards. Still, there are some significant differences between the two:
|Feature||Unsecured Card||Secured Card|
|Credit limit||Based on creditworthiness||Based on the amount of deposit|
|Interest rates||Lower with a high credit score||Generally higher|
|Credit check required||Yes||Sometimes|
While your child might qualify for a secured card without a strong credit profile, they’ll need to put down a deposit that will typically serve as their credit card limit. You can help them save up for the deposit so they can get the card sooner.
The main downsides of a secured card are low credit limits and high interest rates. Your child might not get access to all the funds they need, and the high cost of using the approved amount could make repayments more challenging.
Is Adding a Child to Your Credit Card a Good Idea?
Source: Van Tay Media
Naming your child an authorized user of your credit card is a popular alternative to co-signing. There are several reasons for this:
- There are no qualification requirements, and many banks don’t impose age restrictions
- The child gets access to additional funds the same way they would with their own card
- The child can develop healthy spending habits from an early age
Despite the above benefits, authorizing a child to use your card can be riskier than co-signing theirs. This is because authorized users get access to borrowed funds without being held accountable for them. The primary holder retains full responsibility for all charges regardless of who made them.
If your child isn’t disciplined, this can lead to large amounts of debt. Not all banks let you set a spending limit, so there’s a chance your child would have unrestricted access to your credit card.
Some parents still decide to add children to their cards, thinking that doing so helps them build credit. This isn’t necessarily true, as the child’s credit activity is only reported while they’re registered as an authorized user. Once you remove them, all related activity is removed from their report, so they must start building their profile from scratch.
If you want to help your child build credit without credit cards and the associated risks, there’s a safer approach to consider—FreeKick.
FreeKick—Safe Credit Building for Children and Young Adults
FreeKick—offered by Austin Capital Bank—helps parents jump-start their children’s credit profiles to give them a significant advantage in life. It combines a Federal Deposit Insurance Corporation (FDIC)-insured deposit account with convenient credit profile building and monitoring services.
Getting started is as easy as one-two-three:
- Create an Account—Sign up at FreeKick.bank and choose a plan
- Set It and Forget It—FreeKick does all the legwork to build 12 months of credit history for your child without your active involvement on your part
- Keep Growing—When the 12-month cycle ends, you can sign up for another 12 months or close the account and have your deposit back
To avoid overwhelming your budget with yet another monthly subscription, FreeKick offers a free plan and two options with small annual fees based on the deposit amount:
|FDIC-Insured Deposit Amount||Plan|
FreeKick is suitable for children ages 14–25, so it’s an excellent option for helping your young one start their credit journey early.
As soon as you open the account, FreeKick will start building a payment history for your child. Note that credit reporting works differently, depending on whether your child is:
- A legal adult (18 and over in most states)—FreeKick will start reporting their payment history to the major credit bureaus immediately
- A minor (14–17)—Credit history will be reported as soon as your child reaches legal age and activates reporting through a simple process
You can close your FreeKick account at any point without penalties. Note that credit bureaus only accept reporting for adults, so if the account is closed before your child becomes one, no reporting can be done for that account.
Keep Track of Your Child’s Credit Profile With FreeKick’s Monitoring Services
Regular credit profile monitoring isn’t only important for ensuring your child stays on the right track—it’s also an excellent way to minimize the risk of identity theft. One in 50 U.S. children falls victim to this crime annually, with minors being the most affected group.
Due to a lack of identity monitoring, financial criminals can exploit minors’ sensitive information to create new identities. This is known as synthetic identity fraud, and it can be difficult to detect and resolve.
An average parent is swamped with responsibilities even without such worries, so FreeKick offers various services to help you keep track of your child’s sensitive data.
Let your child enjoy the many benefits of a strong credit profile and help keep their private information safe by signing up for FreeKick.
Featured image source: Gabrielle Henderson