When Should Your Child Start Using a Credit Card?

Time To Read 3 MIN READ

Date: May 17, 2017

Ask a random sample of people about credit cards and you'll probably hear a range of answers — from how dangerous they can be for accumulating debt to how fantastic they are for racking up rewards or providing access to cash in an emergency. So it's no surprise there's debate over when parents should allow their children to start using credit cards. Knowing the pros and cons of children managing their own accounts will help you make an informed decision about the right time for your child to get his own card.

Persons Under Age 21

The federal CARD Act of 2009 has made it more difficult for those under 21 years old to get a credit card. Young applicants must show proof of their own income and ability to repay the debts they may rack up.

Without proof of income, young people under 21 can only get a credit card if someone 21 or older — like a parent — cosigns for them. Keep in mind that cosigners are legally liable for any unpaid debt on the card. Just because you can do something for your child doesn't always mean it's in their best interests.

Benefits of Getting a Credit Card Early in Life

Helping your child get a credit card at a young age helps her get a head start in building her credit history — but only if the history is positive. If you cosign for your daughter’s credit card when she’s 18 years old, she’ll graduate college at 22 with four years of credit history built up.

If she pays the credit card balance on time every month, that's four years of positive credit history compared to just one for the student who waited until 21 to get a card. This will make looking for a car loan, apartment or mortgage much easier for her. But, if the credit history shows frequent late or missed payments, the negative credit history can hurt her.

Alternatives to Credit Cards

Credit cards aren't the only way to teach children the value of budgeting. If you're anxious about your child jumping from an allowance straight to a credit card, you've got some intermediate options. Consider opening a checking account that you have access to and letting your child use a debit card on that account. 

Another option is to make your child an authorized user on your own credit card account. However, check to see if the card issuer will report your child's credit history to the credit bureaus. If it will, your good — or bad — credit will show up on your child's credit reports, even though the account is in your name. 

Some credit card issuers let you cap the amount an authorized user can charge on the card, so you can restrict how much your child can spend.

Maturity Level

Ultimately, there's no universal answer for when every child should start using a credit card. Seriously consider your child's maturity level when it comes to money. You may trust her to use a credit card only for emergencies or to stick within a predetermined budget. 

There are long-term benefits for children who build their credit history at a younger age. However, waiting until they’re 21 won't doom them to financial obscurity either, and it's better for your child to have an empty credit history than one showing unpaid bills. Your credit history can be tarnished as well, and you'll be on the hook for debt your child can't repay.