Many parents add their adolescent children as authorised users to their credit cards. Their motivations differ. They might want to teach their teen how to use credit responsibly, or they might want to start building their own credit history. Alternatively, they want to ensure that their child has access to a credit card in case of an emergency. Whatever your reason, you can add your teen to your credit card account by contacting your credit card company. After you’ve added them, make sure to establish ground rules to ensure that your teen uses the card correctly.
Part 1 Adding Your Teen as a User
1. Select a credit card with a low credit limit. You are liable if your adolescent loses control and racks up massive bills. Your credit score may suffer as well. As a result, you should consider adding your teen to a credit card with a low limit.
If none of your cards have low limit options, contact your bank to see if you can get one with one. For example, you could have a $30,000 credit limit on one card. Your bank may be willing to divide this into two cards, one with a $25,000 limit and the other with a $5,000 limit. You’ll enrol your adolescent in the card with the lower limit.
2. Gather required information about your teen. You’ll need to give your bank your teen’s personal information so that they can be added as a user. Gather the following:
full legal name
date of birth
Social Security Number
3. Please contact your bank. You can frequently add a user over the phone by calling your bank. If you use online banking, you may also be able to add them online. Depending on your bank, the exact procedure will vary.
You can access your online account with a Chase credit card, for example. Then, from the “Access Manager” overview page, choose “Add New User.”
4. Limit your teen’s purchases. You can limit the number of transactions that your Chase credit card can make. You can also specify what types of transactions they can make and set transaction limits. Check to see if your credit card offers a comparable option.
You should also think about getting alerts for any large purchases. For example, you could be notified if you make a purchase worth more than $100.
Part 2 Setting Ground Rules
1. Teach your child how to budget. Before you even give your teen a card, teach them the importance of budgeting their money. You don’t want your teen to see the credit card as a source of easy money to spend on frivolities.
Giving your children three envelopes is a good technique. Label them with the words “Save,” “Spend,” and “Share.” If they receive an allowance or have a job, they can divide their money and put it in separate envelopes.
You can open a savings account with your teen if they are older (or have more money). This is an excellent way to emphasise the significance of saving.
2. Make a list of approved purchases for your child. You may need to specify what your teen can and cannot do with the credit card. If their car breaks down, will they have to take a cab home? Sure. But what if they decide to go to the movies at the last minute, despite the fact that all of their money is at home? You should explain to your child what they can and cannot purchase with the card.
If necessary, make a list and email it to them so they can consult it on their smartphone.
You might want to give your adolescent more leeway. However, you should go over when it is appropriate to use credit and when it is best to use cash.
3. Talk about repayment. If you want your teen to reimburse you for any purchases they make, you should discuss this with them right away. Tell them when you expect to be paid and how they can do so (e.g., in cash).
You can require payment in full on the day your credit card statement arrives at your house to help instil financial discipline.
4. Teach your teen how to protect their financial identity. Another problem you have to worry about is identity theft. If someone steals your child’s credit card, they can use it to make purchases. Teach your teen the basics of protecting their credit cards:
Don’t leave the card lying around.
Don’t lend the card or your credit card numbers to someone else.
Avoid giving the number to someone over the phone unless you called them.
Watch the card during any transaction. Ideally, you should take it back as soon as the cashier swipes it.
Don’t sign a receipt that has a blank line on it.
Save your receipts.
5. Examine your bill. Every authorised user receives their own credit card. The bill, however, is still sent to you as the primary cardholder. Check your bill to ensure that your teen followed your rules when using the card.
Make a note of any purchases that appear to be suspicious. You should inquire about the purchase and why it was made by your adolescent.
6. Discipline as needed. If your child overspends, you should respond appropriately, preferably in a way that teaches your child important financial lessons. You should not simply ground your child. Consider the following instead:
Encourage them to get a part-time job or do housework to help them pay off their debt.
Request that they return the item to the store in order to receive a refund.
7. If necessary, remove your teen from the card. If your teen encounters problems while using the card, you should seriously consider removing them and exploring other options. In general, removing an authorised user is simple. Contact your bank and request that your teen be removed.
Some banks may require you to fill out a form or submit a written request. Check with your financial institution.
Part 3 Considering Other Options
1. Make use of a prepaid debit card. Instead of a credit card, give your child a prepaid debit card. You can either load money onto the card or have your teen load it with their own money. When the funds are depleted, the card is declined.
Remember not to use your debit card for overdraft protection. If you do, you will be charged overdraft fees if your child overspends.
Of course, if the card is overdrawn without overdraft protection, it will be declined. You may be concerned that the card will not work in an emergency, especially if your child spends the entire balance on luxuries.
While your teen is still living with you, it’s probably best to start with a debit card. In this manner, they will be able to contact you in the event of an emergency. If your teen is off to college, you should probably stick with a credit card.
2. Apply for a secured credit card. This is similar to a debit card. The bank extends a line of credit in exchange for a deposit. Secured credit cards typically have low credit limits of $300-500. This could be an excellent option for a teen.
You may be able to obtain a secured card from a bank with which you already have a regular credit card. Please contact customer service and explain your situation. Consider getting a secured credit card and adding your teen as an authorised user.
3. Give your teen some cash in case of an emergency. Cash is just as useful in an emergency as a credit card. If you are concerned that your child will need money unexpectedly, you can have them carry a money clip with extra cash.
Of course, cash is also very easy to spend, and you’ll have no record of what you spent the money on.
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