If I make kids authorized users on my credit card, will it help them?

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Q. I’d like to help my kids with their credit. They are 14, 18 and 21. If I make them an authorized user on one of my cards, will that help them? Or what do you suggest?
— Mom

A. It’s great that you want to get your children on the right path for building a good credit report.

But you need to consider what the move could mean for your own credit.

As long as you can control how they spend on the card, it can help their credit, said Jody D’Agostini, a certified financial planner with Equitable Advisors/The Falcon Financial Group in Morristown.

She said you would be responsible for the payments.

“You can also teach them great life skills such as paying on time and living within a budget,” she said.

It’s also an opportunity to explain the pros and cons of a credit card versus a debit card, she said.

“A debit card is essentially pay with cash, while the credit card is borrowing money to pay for something with interest accrued if not paid on time,” she said. “It is helpful to show them how interest can quickly add up if not paid on time.”

Another way to start building credit is for you to cosign on a car loan or lease or their first apartment, D’Agostini said. You should be sure that they are mature enough to pay on time, however. If not, your credit could be hurt, she said.

“These financial lessons should start at an early age to teach smart money skills such as saving 10 to 15% of your income and to put aside more than you earn,” she said. “They can learn the value of paying bills on time and not maintaining large balance on credit cards.”

D’Agostini said it’s hard to establish credit under the age of 18, but there is a newer option.

“They can put a cell phone, utility or internet provider in their name and ask for them to be reported to the credit bureaus,” she said. “The payment history will now be reported to the credit bureaus to help build their credit.”

Again, it should be emphasized that they will need to pay the bill on time. Setting up automatic deductions from their checking account may facilitate this, she said.

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This story was originally published on Dec. 28, 2021.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.