Ask the Readers: Would you give a child a credit card?
Published on - March 15th, 2013 (by Ellen Cannon) I’m personally a proponent of making teenagers authorized users on credit cards. My thinking is that it gives the parent the opportunity to teach their kids about managing credit while they’re at home and how to read a credit card statement (explain what the different interest rates mean, how fees are applied, etc.) while starting to build a credit file for their children. Of course, I don’t have kids, so I have never had to put this into real-world practice.
But reader HKR told us recently how she’s added her stepdaughter on her credit card. Here’s her story and her question for you.
OK, I know this is going to sound crazy, but I just got my stepdaughter a credit card for her eighth birthday.
I know, my eyes are still bulging a bit too, so let me explain. My husband is very debt averse; he believes in working hard and paying in cash. It’s sound logic, developed mostly from experience: before he met me, he ran up a credit card (or two) and it took a long time and a lot of interest to pay them off.
Nowadays, although he still manages his personal finances, I handle all the joint bills and expenses, and I’m a big believer in utilizing rewards credit cards. Last year we paid $0 in interest/fees and earned nearly $700 in cash-back rewards; the year before, we put everything for our wedding and honeymoon on the cards and got around $1,200 cash back.
My husband now sees the value in the wise use of credit. He also more strongly believes in the value of a good credit score after seeing how much of an impact credit scores have on interest rates–and consequently interest paid.
We feel have a pretty solid grasp of financial principles and skills, which we are using to improve our lives, and we want to pass that on to his daughter. Unfortunately she only lives with us every other weekend and for eight weeks in the summer. The rest of her time she spends with her mom. We all get along pretty well, but the fact is my stepdaughter’s mom is not good with money or credit, and I’ll leave it at that. I love my stepdaughter and want the best for her future, but I fear that she’ll pick up her mom’s poor money management skills.
Several of our friends live paycheck to paycheck with no thought for bettering their situation, and I’d hate to see my stepdaughter end up that way, too. Life can be so much better, and I want her to be able to experience it to the fullest.
To that end, we try to impart what money lessons we can: incorporating a chores-based allowance system, teaching her the value of saving, and taking her to garage sales to let her learn about making good purchasing decisions through trial and error. We teach her about charity too, but take a service-based approach to that.
As I was driving home the other day, it occurred to me that one day we’ll need to teach her about responsible use of credit, and it’ll probably be tough. I considered my own financial upbringing: my parents refused to co-sign anything except student loans for me, which overall I believe was a good policy. I couldn’t help but think, however, that it would have made things easier if I’d understood more about credit, and had good credit to start off with rather than no credit. Light bulb moment: I could help my stepdaughter start building credit now so that when she needs credit in the future — whether for a car loan, cell phone, or apartment — she’ll have it, without needing a co-signer. Furthermore, this could be a great way to introduce the concept that credit cards actually do correspond to cash.
My first credit card was a Walmart store card with a $400 limit that I got when I was 18 in order to get 0 percent financing on a $200 MP3 player (maybe not the best reason to get one, but unbeknownst to me at the time, it helped build my credit). I still have that card, although I rarely use it since there are no rewards. We used this card since it was available and we didn’t want to apply for a new card. My husband thinks this is a great idea, and we have spoken with my stepdaughter’s mom, and she is agreeable to the idea too. So I added my stepdaughter as an authorized user on this card.
A card with my stepdaughter’s name came in the mail, and the card’s credit history should show up on her credit report in the next month or so. Whenever we go to Walmart with my stepdaughter, we’ll let her use her card to buy a few of the groceries and then give her cash to pay for them, which we will do by going to the service desk immediately after the transaction is complete.
When she’s older, I plan to teach her how to pay cards off online, which we will also do as soon as we get home from the store. By starting this routine at 8, she will have 10 years to develop a habit of only using cards when you have cash and paying them off promptly. She will simultaneously be developing a good, long credit history.
Of course, there’s always the possibility that she will misuse the card, particularly when she hits the teenage years. Using a store card with low limits should help minimize the damage, and the card will stay at our house, used (theoretically) only under our supervision. If she does sneak it out for a shopping spree, however, we can use that as a lesson too, both on the subject of interest and the repercussions of spending more than you have (e.g., lots of extra work).
Has anyone else done this, or something similar? If so, how did it work? If not, what do you think of the idea?
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Honestly, I`m a bit shocked that an 8 year old is given a credit card. Just the idea of having a child buying things she doesn`t actually have the money for scares me! I know credit cards are the big thing in the states, but why not try with a debit card with a spending limit? That way the money she spends is actually money that exists! It`s a small step forward from cash, but it`s still a movement towards credit cards. And when she´s learned how to use the debit card wisely, she could get a credit card… Just a thought!
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Sorry, but I think your thought processes have been hijacked by the over-immersion in PF blogosphere. She’s eight. It’s too young.
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Mr. PoP and I were both added as authorized users on some of our parents’ credit cards when we were in high school (for running errands for them mostly – picking up groceries or filling the car with gas), and it definitely made a positive impact on our credit scores. But 8 seems really young.
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Same here — my mom made me (and my brothers) authorized users when we turned 16 and had the car keys. Honestly, that was plenty of time to develop good credit habits for us. We had to pay my mom back each month for anything that wasn’t an authorized expense. So, school clothes in the budget were fine, but if I wanted a cute dress, I’d give my mom cash before the bill was due.
At a younger age, I’d stick with talking about money, discussing what we could and could not afford, and getting the kid a savings account. A savings account with interest would be awesome, because you could make sure your step-daughter knows how much money she had at the end of the summer, and then you could show how much that money grew by the beginning of the next summer.
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My parents had a very different position on this issue: prove you can handle money responsibly BEFORE getting a credit card. My siblings and I didn’t get credit cards until we were 20 — after we had many years working and managing money responsibly. I could happily have continued on without a credit card but my parents wanted me to start building a credit score.
Credit card culture is very different here in Canada than in the U.S., but I find the idea of a kid that young with a credit card rather shocking. (Maybe parents should at least wait until their kid can understand how interest works?) I’m not going to tell anyone how to raise their kids, but I’m still trying to wrap my head around this one.
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If I had a 8-year-old child or stepchild that I was trying to influence positively during visits, I don’t think credit cards would be on my list. In my opinion, there’s so many more important things, even limiting it to financial education. I would help her open a savings account and be sure that she deposits a portion of her allowance regularly. Establishing a savings habit is much more vital than establishing a credit card habit.
Another huge concern would be the mother. If she’s bad with credit, I would be worried that she would one day misuse the “good credit” that I’d helped my stepdaughter establish. I’d be checking my stepdaughter’s credit reports regularly.
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We added our son to our Internet card (low limit) when he went to Europe with a school group. (He paid for the trip.) Now he puts college costs like bus passes and books on it. He also uses it for convenience and we have to chase him down for what he owes. New rule: we need the receipts for anything put on the card. Next step: he gets his own card on his own.
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1. You are wrong about building credit in her name. You are 100% responsible for charges.
2. Bad bad idea!! There is NO reason an 8 year old should have a credit card.
3. This should post should be deleted.
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H is correct. The credit reporting agencies have fixed the loophole. In order for it to be appear on her credit report, authorized user is not enough, she must be a joint account holder. That means she must be approved. Good thought, but needs more follow-through.
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Actually not true. Children and spouses who are authorized users do get credit. The credit reporting agencies had removed authorized users from being reported because of scams, but after much flip outs by parents and spouses who had a SAHS, they adjusted it so that those who live in the same house, can get credit for it. My credit report still shows my mother’s credit card that I am an authorized user, even though I have move out.
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Here’s the deal on authorized users, per a Mint article on January 14, 2013: http://www.mint.com/blog/credit/building-and-improving-your-credit-in-2013-the-authorized-user-strategy-0113/
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While it isn’t a BAD idea, I would propose that instead of having her buy some groceries when you go to Walmart, allow her to buy an item, for herself, and then have her pay it off with HER OWN cash that’s been saved from her allowance.
If she doesn’t want to buy an item, then she doesn’t have to. But if she wants something “extra” like a bag of cookies or a new hair accessory… allow her to pay for it herself, using the credit card you’ve established with her name on it.
Then at the ripe old age of 8, you’re teaching her the value of spending her own money, and the proper way plastic works. (Let’s face it, debit or credit, in the actions you describe above, are basically the same if you’re paying the credit card off immediately.)
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I was a little surprised when you said she was 8 as well, but I don’t think it is a bad idea at all. I plan to do something similar with my daughter when I feel she is “mature enough”… 8 or 18, doesn’t matter.
That said, I think letting her buy something that she wants and pay off with HER MONEY as Kay suggested is a better way to go about it. Not sure if an “extra” bag of cookies or a hair accessory qualifies unless she was already saving up money to buy it. I would think something more along the lines of a cool toy that she was saving up for anyway – but use the card to buy it and pay off immediately with the money she saved. I would personally add her on to a rewards card, and give her the cash equivalent of reward points. This will show that using credit card is no different than using cash, except you get a little bit of cashback through reward points
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I like your tips! But unless a child can pay a credit card bill from his or her own bank account, I’m not sure credit cards are necessary at this stage.
I agree with the comment above — why not save the lesson for a larger purchase? Using a credit card for something incidental like a bag of cookies may send the wrong message.
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I strongly believe this is a bad idea. I had a credit card in high school for gas, etc. that my parents have me, and it helped my credit score, but it didn’t help my understanding of money because the inexhaustible bank of Mom and Dad paid the bill. 8 years old is too young to comprehend this idea, let alone getting a lesson every other weekend. I think you’ve over-estimated her cognition level. I would do something on a trial basis, when she’s older, over the summer when it can be a consistent lesson. Unless your step-daughter is truly precocious, I think you will regret this decision.
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Yikes! 8 year olds can get credit cards?!!?! Wait, is it April Fools Day?
I had one when I was around 16 and that’s the youngest I’d go. My biggest concern with giving one to a child would be that they would likely lose it.
Plus, I can’t imagine getting that gift as a child. What a bummer to get some silly piece of plastic instead of a fun toy!
I honestly can’t see any reason to give one to child.
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Heck no, I wouldn’t get a kid a credit card. I would let a child or teen learn to be responsible with cash. I didn’t even want my sons getting credit cards in college. And they both were glad to use cash during their college years. Both are adults now, have excellent credit, and are extremely responsible. As far as reading a statement, a five minute discussion should take care of it. I am a retired teacher, and have taught many eight-year olds. I would encourage parents to let kids be kids, and not worry about the grown-up world yet. There will be time for that.
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I think 8 is too young to really grasp what is going on. On the other hand, if you’re raising her to be responsible, she’ll probably learn how to use credit responsibly.
My parents encouraged me to get a credit card with a $600 limit when I was 18. That way I could start building credit history.
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I find it admirable that you are teaching your stepdaughter lessons about money at such a young age. Kids can pick this stuff up earlier than we think. My 6, 10, and 12 year olds already have savings accounts and understand things like how interest works, budgeting for purchases and giving.
I would not give them access to a credit card mainly because I don’t believe in using debt as a tool to advance my financial life. We are teaching our kids to live debt free. So if you go this route, make sure the lessons are taught about the dangers of debt and how that can destroy one’s financial life when used improperly.
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I think 8 is too young, but agree that teaching kids about how to use credit responsibly before they hit college (that’s when I got my first card) is a good idea.
I think at 8 I’d be working on having the child learn savings, giving, earning, etc. Credit would come later.
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I don’t have children yet. However, I’ve spent my entire life surrounded by children. I agree, 8 is too young. It’s great that you’re trying to build her credit history, and great that you’re trying to teach her to be responsible with money. But I think you’re taking too big of a leap into the more advanced end of the financial world, especially for an 8 year old. At that age, she should be learning about saving, spending and giving. She’s just wrapping her head around the idea of what small things cost, like toys she wants, or clothes. The concept of charging something and then immediately paying it off in order to increase your credit score is beyond the scope of what an 8 year old can grasp, and is likely causing more confusion than it is helping. Especially when you tie in the fact that she’s charging for things like groceries that you’re giving her the money for, instead of things she’s buying for herself, and earning the money for.
Each child is different, and parents know best what their child is capable of understanding and is responsible enough to accept. I don’t see this as being so much an opportunity for abuse (although it is making it easier, especially since there is a third, irresponsible parent involved), as much as a problem of adding confusion by introducing concepts at too young of an age.
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I thought it was a surprising age to have card but not too young to grasp the concept of money management. I was surprised that a number of people think of 8 as too young to understand. It does depend on the child but underestimating a child’s a abilities would do just as much harm as overestimating them does. It’s application of mathematics that children learn in school. Interesting idea!
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I see your point. And yes, every child is different in what they understand. But, sit down any 8 year old, 10 year old, 12 year old, and ask them to estimate how much you earn in a year. How much does a new car cost? How much is the house worth? Very few, if any, will even be in the ballpark. Which is fine, those are all concepts you learn over time. Same with credit scores. The idea that there are businesses with the sole purpose of tracking money you borrow, and how responsible you are at paying it back, and that those businesses report to future lenders, or apartments, or employers, which then decide whether you can borrow more money, or rent an apartment, or get a job? That’s a big concept for such little kids! Which is fine… there’s lots of time to learn those concepts. No 18 year old needs 10 years of credit history!
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I like this idea of building credit at a young age. However, I think that before you can learn how to spend money, you need to learn how to make money and live within those means.
I am strongly against the bank of “Mom and Dad” for teenagers and young adults, but for an 8 year old money should not need to include credit scores and interest payments – let’s keep it simple and teach them where money comes from and how to save it.
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Matsigenka children can
http://www.newyorker.com/arts/critics/books/2012/07/02/120702crbo_books_kolbert
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There’s a big difference between being a contributing member of the family and being expected to grasp adult financial concepts. When I was a child, by 9 I was expected to do my own laundry, and by 11 I was cooking the family meals. And my mom held me accountable to that; There were many a time when I went to a game in a wet cheerleader outfit because I didn’t plan enough time to wash and dry it. And if I have children some day, they will also help with household chores, learn to cook and clean, and be responsible for some of their own things. Just because they can help around the house at 8, doesn’t mean they’re ready to be using credit and grasping the idea of credit scores.
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While credit cards personally give me a rash, I think it’s a nice experiment to try to teach financial responsibility from a very early age. When this kid grows up cash will probably be obsolete.
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There’s a big difference between children learning tasks versus grasping abstract concepts like credit and debt. I suspect young children would understand how to pay using plastic — you insert the card here, push these buttons, etc. — but not grasp the idea of debt.
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8 years old is too young. I think that children should learn the importance of saving spending and giving to others. I believe if you don’t have an income there is absolutely no reason you should have a credit card. I received my first credit card last year in 2012. I was 22 years old fresh out of college. My parents didn’t allow me to get one in college because I had no income. All I had was the my mom and dad. I look back at my time in college and remember when I graduated in 2011 and how I had no money. But I also had NO credit card debt. My friends were coming out of college with thousands of dollars of credit card debt. If your parents are ultimately the ones that will pay off your card I don’t understand how that will teach anyone how to manage money.
The best way I think is to learn how to save and understand what you need to be using credit cards for. There is nothing an 8 year old needs to be buying on credit. This post makes me question this site in a major way. Shocked!
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I didn’t even realize a child that young could get credit. My mother made me an authorized user on her card when I went to college. I was only 17 and couldn’t get my own credit card. But it was ONLY for emergencies or schoolbooks.
I agree with other posters that at this age, teaching the value of savings is much more important.
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When I saw the title of this, I assumed by “child,” it meant a 15-year-old. I don’t know what lessons an eight-year-old could take away from having a credit card and if it’s just to build their credit, they could just be added as an authorized user later on…
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Count me in the camp that thinks this is unnecessarily early. My oldest boy is 3 and I’m all for getting him started with a credit card once he’s in high school. I think the question needs to be asked – why does a child or young adult need a good credit score? Usually it’s to get a better interest rate on a purchase. I don’t imagine our son will be buying or financing a car until he’s on his own after college if he wants to go that route. Our plan would be for him to work and save up to buy his first used car, probably when he’s in high school. If he decides to buy a car or a place to live after college that will likely be the first time his credit score will come into question, so hopefully the 7-8 years of history between early high school and after college will be enough time for him to earn a good score. Just something to think about.
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I don’t understand why an 8 year old would possibly need a credit card. They can’t drive, so they can’t do family errands. Free range parents aside, 8 year olds tend not to use public transportation alone in cities anymore. For the most part, they can’t work, so they can’t have a large income. What use could they possibly have for unlimited access to credit that wouldn’t be better served by learning how to use and manage cash? Maybe if the 8 year old is one of those entrepreneur prodigies and needs a business card?
Now, after the kid has a drivers license and starts being able to do errandy chores that require purchasing things, or in college when the kid needs to buy textbooks and living expenses… but I don’t get earlier than that. 16, 18, and 22 are all plenty early to start building a credit history.
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I’m always wary of giving children of any age a credit card because it teaches the wrong lessons about personal finance because their personal expenses are so skewed when they get lodging and food for free. Maybe instead give them $300 a month on paper, but immediately deduct $200 for lodging, then $2 per meal eaten at home and load the rest on a prepaid debit card.
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When my youngest daughter turned 2, I had to start buying her a seat on the airplane instead of having her ride on my lap for free. When that happened, I also signed her up for a frequent flier account, because if she is going to pay, she is going to reap the rewards just like anyone else.
In the mail a few weeks later, came a credit card application for that airline card. I filled it out, along with one for the older daughter. The bank called me to verify birth dates, and then told me that children that young could not have credit cards. I asked why they sent the applications in the first place.
I was prepared to have each girl have her own card, and to have me be the joint card-holder. I would allow them to charge frequently, to learn about different ways to pay. But mostly, it was to start building credit in their names, so when they are adults, they have a very long credit history.
While I agree with many responders that 8 is a little too young to grasp the concept, it is never too young to start building credit. However, as an authorized user on your account, I don’t think she is building credit. I think you need to make her the primary account holder, and you a joint account holder (if they will let you) to build credit in her name.
You can always get a brand new card and ask them to reduce the limit to $400. Many times I have gotten letters in the mail “Congratulations, we have increased your credit limit” and I will call them up and have it dropped back down again. I don’t need a higher limit.
My parents got a new card with my sister and I named on it as well. They were ultimately responsible for it, but after we started to drive, they wanted us to have a way to buy a new tire if we had a sudden blowout, or to be able to put gas in the car even if we didn’t have any cash on us. We had to pay it off at the end of each month, or they would take it away from us until we did pay it off. A great lesson. Thanks Mom!
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From my experience some credit card companies do report the authorized user as well as the primary.
If you don’t have a spending problem, higher limits will only decrease your debt to limit ratio, increasing your credit score. I guess that’s up to a certain point though, no reason to have outrageous limits.
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I disagree that a 8 year old is too young to understand or too young to teach. You teach financial skills first by example, and the example children usually see is that of a magic card that lets you have whatever you want whenever you want it. All the debt, bills, interest, and budgeting is usually completely opaque to a child nowadays. Fifty years ago a young child would see their parent go to the bank, withdraw cash, use that cash at stores, put things back if she didn’t have enough cash with her at the time. The more sophisticated parents would write checks, and the child would see them input that check in the register, and balance their checkbook. My kids don’t see me do that. I get stuff ’cause I have a card. They don’t have access to mint, they don’t always know if I tell them they can’t have something if I say that because I can’t afford it, or because it is inappropriate or just cause our house is too filled with useless Stuff as it is. She isn’t talking about giving her kid free reign on a credit card. She is talking about making credit cards transparent, and showing how it is related to the cash allowance they have by showing that once you make a purchase you can go to a desk and immediately see that there is a debt owed. I think it an excellent idea, and will discuss with my husband making it a homeschooling unit. Maybe I’ll make the unit a history of trade. We can start by bartering, and move through currency into banks and eventually to credit cards. In fact, I think I will email my homeschool group to brainstorm something.
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I agree with you completely. I feel like a lot of commentors didn’t even both to read the article before freaking out.
Knowing what the “magic money card” is and how it works is incredibly important these days!
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I agree on this. The poster clearly though it out carefully and plans on using the experience as teaching tool. Does seem as if some commenters didn’t read carefully. As I was reading, I found myself agreeing. It certainly didn’t seem as if the 8 year old was going to just be carrying it around. It is a tool to help her learn how to manage money, not really any different than having your child pay with cash and count the change or learning how to make dinner (’cause yeah, a stove can burn you).
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The problem with this is that a credit card involves a legally binding contract that a minor CANNOT legally enter into (in the USA, at least).
The USA also has laws against minors operating motor vehicles such as cars on the street, and laws against minors buying alcohol and cigarettes as well. Sure, parents allow their children to break these laws, but it’s not always a good idea.
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BD, why does it matter that a minor cannot enter into a contract? That fact is exactly why a minor can only be an “authorized user” on a cc and not the primary or a joint holder. This way, the minor is permitted to use the card, but is not legally liable to repay it — only the primary cardholder is (and the joint holder, if there is one, such as both mom and dad). In case of default, the creditor can only go after the primary/joint holder for repayment, but the authoized user is not on the hook. In other words, the authoized user is not entering into a contract with the creditor at all, but rather the primary/joint holder is agreeing with the creditor that they will be responsible for all of the authorized user’s charges.
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LeRainDrop: Yes, I’m aware of how this works.
Like other people said: The child has no skin in the game. You yourself pointed out exactly how it works: The adult has to be liable for everything, because the child cannot legally be held to anything. If this is the case, the child is too young to have a credit card, and it’s questionable whether or not any real lessons can be taught like this.
I know some parents let their kids drink alcohol at home too, even though they’re not old enough to legally purchase it. Not always a good idea, though, I suppose you might disagree with me.
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I think the answer depends on the maturity of each child, but I agree with many people that an 8 year-old may not benefit from a credit card. My dad added me as an authorized user on his card when I was in middle school. He intended to build up my credit and to allow me access to money in case of emergencies. I never used the card though because I disliked the thought of spending money that didn’t belong to me.
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As I understood the article it was about injecting the child into the process of using credit, but not so much about giving the child credit. She has card in her name but can’t use it unsupervised, isn’t responsible for the debt and isn’t making the purchase decisions. It seems safe as long as the parents keep the card
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Sorry I must disagree! WAY TOO YOUNG!
I might let a preteen kid have a debit card for a bank account – IF the charges would be refused if there isn’t enough money for the purchase. But there’d be no way if the bank made me have “overdraft protection” for the kid. It’s not protection – it’s a crutch.
But no way for a credit card – especially since an 8 year old likely can’t even balance a checkbook yet. Let alone have a good understanding of compounded interest. (My youngest will turn 8 in a few months – so I can say this.)
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Maybe… We were taught how to fill out a check and balance a checkbook in the third grade. That would have been 1989-90, in a public school.
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I love it. I don’t think 8 is too young if all the card use is monitored at this point. I think too often we make excuses for our children: if she says she’s not interested or isn’t learning then put it off, but don’t make that decision for her.
If it were me I’d get her a secured card before she takes it out on her own, so there is real money attached to it that she had to earn but still gets her credit built and the same lessons attached.
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8 is far too young. Start with a checking account when she’s around 13. That will come with a debit card that you’ll need to make sure is set to not allow over drafting. She can put her allowance and any other funds she comes into in that account and learn to use HER limited funds wisely.
Get her a credit card with her name on it once she’s in high school and driving.
She will go overboard and rack up some debt at some point in her younger days, regardless of how well you teach her about being financially responsible. We all go through it, get out of it, and learn from the experience.
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Um, legally the card is yours, not the 8 year-old’s. Legally she cannot enter in a contract. So I’m not sure where you’re headed with your reasoning.
That said, we got secured cards for both our daughters, in their own names, as soon as they turned 18. They buy stuff they would anyway, then pay it off. They travel a lot on their own and we also wanted the piece of mind, should they get stranded at an airport, that they could have a safe place to sleep and food.
That is how one builds credit. When they legally can.
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I’m not convinced that this is an excellent direction. I don’t want teenagers to get yet another message that their prime role in society is that of consumer. There is so much more to life than that.
I took two teenagers I love hiking recently. What we saw and experienced together was unexpected and priceless. In fact, I just posted about it, and they excitedly posted comments. Nothing to do with buying anything, and it strengthened our bond. I’m looking forward to our next hike, not our next trip to the mall.
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I think you’re jumping the gun. She’s really too young to understand credit. I am glad you are keeping the card all the time but it seems you’ve opened her up years early to identity theft by having a card in her name. You will have to be vigilant in protecting her because she can’t comprehend all the repercussions of good or bad credit for years yet.
My son is 20 & still doesn’t have a credit card. He does have a debit card, his own accounts (checking, savings, 401k, & 2 small trusts). We use credit cards & pay the balance off each month. As an adult, he chose to only have a debit card for now – the same choice we made when we were young. When he decides to take on credit, he will be old enough to understand & deal with it himself.
I think we can teach out children about credit through our own budget, not starting a credit account for them. It’s worked very well for us.
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I agree. If you think she’s at an age where the concepts are appropriate for her, there is no reason you can’t teach her by showing her what you do. And when you add someone on to an account, the history of that account is added to their credit report. So, if the account stays in good standing, you could have added her 5-10 years down the road, and still given her the credit history of the account.
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I love the idea, but I agree, 8 seems way too young. I think the impact would be much greater in her teens (14 or 15 maybe).
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I don’t have issues with the 8-yo having her own card IF she only uses it when she’s with them. I would make her leave it at their house and only pull it out when making that trip to Walmart. If they think it’s important for her to learn, that’s their choice, though I do think 8 is a bit young.
I got my kids prepaid cards through our bank (USAA). My boys kept finding things they wanted to buy online (Amazon or Nintendo credits for their 3DS), so it was easy to transfer their allowance onto the prepaid card instead of giving it to them in cash. They can’t buy anything unless there’s money on the card, so it’s a win-win situation. I don’t think the prepaid card counts on their credit, however, so that might be a downside.
Once my older kids got jobs, I signed them up for a checking account with a debit card. I added my daughter to my credit card once she started college–for emergencies–though she has never actually used the card. She is 20 and just signed up for her first credit card to finance a computer she needed for school. She was wary (“What if I don’t have enough to pay it off?”), which I was glad about, but she has enough steady income right now that she will be able to pay it off well before the 12-month no-interest period is over. She uses her debit card for pretty much everything.
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My youngest son got his prepaid debit card at age 11, though his siblings were older when they got theirs.
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I’ve been thinking about switching my kids’ allowances to prepaid cards or even checking accounts with their own debit cards.
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I dunno. Any time is a good time so long as it’s not forced down her throat. If she is down to learn, teach her.
My niece is turning seven this summer and has shown interest in learning about personal finance since she was about 3 years old. Curious as to how things get acquired, she asks the right questions and understands the processes quickly.
She still has every coin and dollar bill I’ve given her over the years stashed in her Disney Princess purse. She jokingly acknowledges that she’s a kid and spending money is for adults so she’d rather save so that she can buy a house someday like mommy and daddy. When my sister got married, she was the flower girl – now she’s saving for a wedding too!
She’s only gotten as far as using cash to pay for ice cream from the truck so I doubt she’s ready for a lesson in credit cards. In my opinion, that’s best reserved for her pre-teen years at the earliest, but as I stated, if she’s willing to learn, teach her.
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Chase has a high school checking account that I opened for each of my kids just before they started high school. I also opened a savings account for each of them. Money they earn through working and their allowance (set amount for their part in running the family, following rules and keeping good grades) is automatically deposited out of my paycheck every two weeks. They pay for everything (clothes, entertainment, eating out with friends, etc.) with a debit card charged to their checking account. We keep about $100 in the checking accounts and transfer funds from savings as needed (for example, before a plannned shopping trip for school clothes). Since my son began driving I got him a card on my hotel rewards card so that he can put gas in the car and do my grocery shopping – what freedom for me! He’ll take that card for college to have in case of emergency. He just turned 18, so we need to go into Chase to see about turning his checking and savings accounts completely over to him. In addition, his allowance will end as he will be expected to earn his own spending money once he’s out of high school (he’s earned some, but school has always come first). Does anyone have ideas about making his accounts his versus keeping the high school checking, which is a joing account and therefore I can monitor his spending – and it has been a great teaching tool, like the time my daughter paid an ATM fee for checking her account balance at a non-Chase ATM (she’s never do THAT again!), and to make sure they get in the habit of having their friend repay them when they cover for lunch out and the friend forgot his money?
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I used to be in the camp of getting my daughter a credit card as fast as possible. I thought that this would allow me to teach her how to use it responsibly while simultaneously allowing her to build credit. Now I am more in the mode of teaching her to save as much as possible and only use cash for things. Credit cards scare me!
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I added my daughter, at age 12, as an authorized user on one of my credit cards for two reasons: to help build her credit history and to teach her the value of money. Any charges she puts on the card is paid for in full out of her own checking account. She knows she has to have the money in the checking account before she can use the credit card. At the age of 13 she had saved enough money to buy herself a nice laptop.
I have tried twice to obtain her credit report, but have been told twice that credit reports are not maintained for anyone under 18. Anyone else been able to pull a credit report on their child?
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Your approach with your daughter is the same one that worked for my dad with me
As to your question, I’ve never tried doing that. However, I heard Clark Howard talking about growth in child identity theft in the last year or so, and I just googled “Clark Howard child identity theft” to see what I could find. Here’s a link that might help you: http://www.clarkhoward.com/news/clark-howard/consumer-issues-id-theft/new-free-way-protect-your-childs-identity/nNy2s/ The second link to his site that pops up from the google search is also useful. Good luck!
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I agree with Elizabeth. I would focus on teaching your daughter about handling cash first – not spending more than you make. Once that trait is mastered, then you can add responsibly using credit. I feel you are trying to run before walking.
I do commend you on teaching finance to your daughter though, especially at a young age. It is rare.
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My concern is what exactly are you teaching her ? Are you tying chores or allowence into the use of it so that she understands that there is a cost associated with it. My kids at that age didn’t understand that you had to pay it off. They just thought that you whipped out the “magic card “and could buy anything. We started teaching them at an early age about money & money management so they could understand that credit & debit cards were not “magic cards.” They learned that if you used it , you still had to pay for things with your work efforts. Either by bartering skills in order to earn cash or by getting paid for their efforts doing extra chores so that they could use a “magic card “to buy their wants.It wasn’t as simple as pulling a card out of the wallet.
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Really? I wish there was a better post than this.
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I’m not sure everybody is reading Ellen’s post to the end where she describes the careful controls and mentoring that are coming with the arrangement. If she follows through with that thoughtful gameplan, I think this can be a wonderful way to learn good money habits early on. If the credit card aspect makes folks nervous, I recommend using online IOU accounts (where the parent handles all the payment) or a prepaid card (where debt is not a risk). I think the most important thing is to be intentional, communicative, and hands-on when it comes to teaching kids good money habits – so kudos to Ellen for that!
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No kudos to me. I’ve just posted reader HKR’s question for the readers as the administrator.
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Like others, I’m stuck on the fact that your stepdaughter is 8 years old. Regardless of what happens, for better or for worse, this is a great learning tool for her. You’re providing a real time teaching tool for her to see how credit works. Between your house and her mom’s, she’ll have a well rounded financial education. I hope that you will check in from time to time and give updates. I’m dying to know how this will turn out.
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Once the ex wife with financial problems finds out about it you will responsible for whatever she puts on the card also. Really bad idea!
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I realize that you are trying to counteract other bad examples in her life, but think that this is a bit young. Not fatally so, but I am not sure that there is enough abstract thinking going on at 8 to make this a good object lesson.
I gave my 14-year-old daughter a credit card when she was traveling alone overseas to visit friends. This is partly because it is not easy to get Bolivian currency here. Almost the first thing she did upon getting off the plane was to hand it back to me, as she was already very careful about handling her own money. Like everything else in parenting, so much of what you do depends upon the child’s personality.
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The comments here are a bit judgmental. I don’t see the problem with giving an 8 year old a credit card, except that I share Phoebe’s concern that one might lose it. But, other than that, it’s pretty harmless.
That being said, I think a better way to teach kids about money is to run your own bank with their allowance. I plan on doing this when I have kids. Tell them they can keep their allowance in a savings account, operated by you the parent. Pay the child interest on what they have saved. Maybe even allow them to borrow, but charge them interest on what they borrow. This will teach them that saving is rewarded, and borrowing is punished.
I would say to use CapitalOne 360 with a subaccount for this, but 0.8% interest may not get the point across. Do it manually with ~10% interest. You could even have the child calculate the interest themselves each month, which would be a nice little math exercise.
I would also read to them “How an Economy Grows and Why it Crashes.” Great “kids” book about how an economy works (though every adult should read it, too)
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I will read the comments later, but: NO NO NO NO NO!!! SUCH a bad idea!!! Where do I even start?
1) A credit card is too intangible for a young child (and many adults). Are you including having her pay her part of the bill with an allowance? Only then will she associate what she charged with actually having to pay down the road. Otherwise it’s “free money”. Doesn’t matter what you say to counter this, it’s just lips flapping with sounds coming out. It feels like free money and that’s all that counts.
2) She lives part of the time with her mother. You are only one influence and not the primary one in how she learns spending habits.
3) If her mom is that bad with money, who’s to say that Mom doesn’t go shopping with daughter + credit card and racks up charges herself? It happens more frequently than you’d believe.
4) IMHO rewards cards teach greed. I realize I’m in a minority on a PF blog on that one, but they teach you to put all your charges with one company and then spend your paycheck paying that company back just to get a couple extra dollars.
5) Using a credit card makes her more susceptible to identity theft.
A better idea is to have your daughter on a joint checking account that allowance/chore money is deposited into. But I still wouldn’t do till she was 13.
Trying hard not to be judgmental on this post and failing miserably. OMG. I just can’t believe I read this on a PF blog. I need to step away now.
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Can’t seem to edit the post – I just wanted to add to point 3, if birth mom has an ax to grind against daughter’s father and new wife, what a great way to get back at them – run up charges on the card and stick the ex with paying for them. This seems like a no-brainer to me.
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I personally would never do that, especially at such a young age. I commend reader HKR for writing about it, but I think I’d give my child the option of NEVER using credit cards, and letting her make her own decision after she’s old enough to understand all the ramifications of credit use. 8 ain’t it.
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