Financial management is a crucial skill that every parent should teach their child. Having open conversations about money is a great first step, but no theoretical knowledge can replace the value of hands-on experience. If you want to give your child an opportunity to learn about lending and the banking system in general, you may ask, “How to get a credit card for my kid?”
Children and credit cards don’t typically go hand-in-hand, so you may find that your young one’s options are quite limited. To help you overcome these obstacles, this guide will show you how to support your child by giving them access to their first credit card. You’ll also learn the pros and cons of doing so alongside other ways to invest in your child’s financial future.
Can Children Get Credit Cards?
To understand whether your child is eligible for a credit card, you must look at two factors:
- Financial independence
Minors can’t legally own a credit card in their name. Neither your child nor you can obtain a credit card that they can own independently. Your child must be at least 18 (or older in states with a higher legal age) to qualify for a credit card.
While the law allows young adults to own credit cards, they must meet additional conditions to get one. The Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009 prohibits banks from issuing credit cards to anyone under 21 unless they can demonstrate an independent ability to make payments.
If your child doesn’t meet this criterion, you can co-sign the account to get them a credit card. In this case, the child would be the primary owner, but you’d share all responsibility for the debt.
Despite the CARD Act’s approval of co-signed credit cards, most major banks no longer support them. Those that do often impose stringent requirements, such as the co-signer having a high credit score.
Considering all of the above, it’s easy to conclude that getting a regular credit card for your child is no easy feat. Luckily, this isn’t the only way to give them access to credit funds.
How Can a Child Get a Credit Card—Two Alternatives To Explore
Source: Mikhail Nilov
If your child isn’t eligible for a traditional credit card, there are two ways to support them:
- Help your child get a secured credit card
- Add them to your card as an authorized user
Can I Open a Secured Credit Card With My Child?
A secured card can be a smart, low-risk way to introduce your child to credit products. It’s another option reserved for legal adults, though it’s easier to obtain than a regular credit card.
This is because your child would have to put down a cash deposit to open the account, minimizing the lender’s risk. Secured cards also don’t require an extensive credit history or a high score, making them more easily accessible to young adults without one.
While you can’t open a secured card in your child’s name (they must do it themselves when they become eligible), you can help them save up for a deposit. You’ll typically need $200–$500, and the collateral will serve as the card’s limit to reduce the risk of overspending and excessive debt.
Despite their benefits, secured cards come with a few shortcomings:
- They’re not available to minors
- They often have high annual fees
- They usually come with a high annual percentage rate (APR)
How To Add a Credit Card in a Kid’s Name to Your Account
If your child is a minor, the only way for them to get access to a credit card is if you add them as an authorized user of yours. They’ll most likely get a new card with their name connected to your account.
Each bank has specific age requirements for authorized users, with some letting you add a child regardless of their age. The following table provides information on some of the biggest banks’ thresholds:
|Bank||Minimum Age for Authorized Users|
|Bank of America||None|
This option can help your child learn about credit early on and give them access to additional funds. It can also help them get a credit file earlier than they could independently if your bank reports authorized users’ activity.
While these benefits seem compelling, authorizing a child to use your card is a risky move you should consider carefully. Authorized users aren’t held responsible for the debt, so you retain the full obligation to repay it. There’s a high chance you won’t be able to dispute any unauthorized purchases because you willingly gave your child access to the card.
Besides, your child’s credit card activity will directly impact your credit score. If they max out the card, fail to make a payment, or show any irresponsible behavior, they could significantly damage your credit profile.
If you’re unsure about your child’s financial awareness and responsibility, you may want to hold off on adding them to your card until they’ve gotten the necessary education.
Can Parents Get Credit Cards for Children To Build Their Credit Scores?
Source: Mark OFlynn
If credit building is the main reason you want your child to have a credit card, you should beware of a few important caveats.
Young adults can build credit with a secured card in their name or a regular one you co-sign if you find a bank allowing it. Note that both options come with certain risks.
While a deposit guarantees a secured card, your child must still make timely payments. Making late payments can appear on their credit report for up to seven years, harming their credit score. If you co-sign a credit card with them, both your credit profiles are exposed to such risks.
As mentioned, adding a child to your card as an authorized user puts your credit in similar danger. Worse yet, it doesn’t help your child build their profile independently—your credit history will only be reported while they’re registered as an authorized user. When you remove them, all that activity will be deleted from their report, so they will have to start again from scratch.
Having all of the above in mind, a credit card isn’t the safest way to help your child build credit. If you need a low-risk and reliable method of setting your child up for an easier future, check out FreeKick.
FreeKick—The Simplest Way To Boost Your Child’s Financial Stability
FreeKick lets parents build credit for children ages 14 to 25 with little effort or risk. Powered by Austin Capital Bank, it combines a Federal Deposit Insurance Corporation (FDIC)-insured deposit account and additional services to let your young one get a head start in life.
Getting started is easy—all you have to do is:
- Create an Account—Go to the signup page and choose your FreeKick plan by placing an FDIC-insured deposit
- Set It and Forget It—Once you sign up, FreeKick will take over and build 12 months of credit history for your child without ongoing action needed from you
- Keep Growing—At the end of the 12-month period, you can renew the account for another cycle to keep building your child’s financial future or close it and get your deposit back
Parents are typically swamped with monthly subscriptions, so FreeKick won’t bother you with another one—you can choose between a free plan and two options with low annual fees:
|FDIC-Insured Deposit Amount||Plan Fee|
How FreeKick Builds Credit for Your Child
With FreeKick, you don’t run the risk of your child damaging their credit through overspending. They won’t get access to any funds, so you can rest assured they’ll start their credit journey properly.
If your child is a legal adult (18 and over in most states), FreeKick starts automatically reporting their credit history to the major consumer credit bureaus when you sign up. Payment history can also be established for minors (14 to 17), who go through a simple process to activate reporting when they reach legal age, as credit bureaus only accept credit reporting for adults.
The sooner you start working on your child’s credit profile, the better—establishing it early in life can save them over $200,000 throughout adulthood.
You can close your FreeKick account at any time without penalties and get 100% of your deposit back. Note that if you do it before your child is of legal age, no credit can be reported on their behalf because of the aforementioned reporting rules.
Help your child build credit the right way—open your FreeKick account today.
Featured image source: Pavel Danilyuk