A healthy credit profile and a good credit rating are the financial equivalents of Willy Wonka’s golden ticket: They’ll open up favorable mortgage rates, qualify you for the best rewards bank cards, assist you rent an apartment and more.
These are, after all, adult milestones — many years down the road should you’re, say, a toddler who’s more fascinated about Bluey than loans. But after I learned the importance of constructing credit the hard way, I made a decision to set my daughter up for fulfillment. I’ve added my 2-year-old as a certified user on my Citi Double Money® Card to make sure she doesn’t have a similarly hellacious experience.
Here’s why letting my 2-year-old have a bank card shouldn’t be as outrageous because it may appear.
To get credit, you need to have credit
I didn’t get a bank card until age 23. I never thought I needed one; I paid money for all the pieces.
It was only after two trips to Asia that I stumbled upon the magical world of bank card travel rewards. Bitten by the travel bug, I desired to keep exploring the world but didn’t have the disposable income to fund it. As I feverishly Googled the right way to travel on the low cost, I discovered that other people were using bank-issued rewards, airline miles and hotel points to pay for his or her vacations. It was a revelation.
My research ended with the conclusion that the Chase Sapphire Preferred® Card was the proper first bank card for my needs. There was only one problem: I didn’t have a credit rating, which meant I couldn’t qualify.
“Responsible” spending habits aren’t aren’t the one thing that matters in your financial profile. You wish responsible credit habits. Banks need to know which you could handle the act of borrowing money and paying it back. In case you use money for all the pieces — like I did — you’ve got no track record.
It should help her when she’s older
Wielding a bottom-of-the-barrel secured bank card, it took me greater than a yr to cultivate a credit profile worthy of the cardboard I actually wanted. So, in preparing my little daughter for a healthy financial future, I’ve added her as a certified user to my no-annual-fee Citi Double Money® Card. This implies she’s a component of my account: not an account owner, but someone who can use my credit line.
While you add someone as a certified user, your account information (typically) appears on their credit report, as well. Adding my daughter as a certified user will generate for her a credit profile — even at age 2 — giving her healthy credit long before she needs it.
After all, some issuers have restrictions as to simply how young a certified user could be. A fast rundown of major issuers’ rules:
Authorized user age policy
Should be 13+ years old (only reports to credit bureaus for 18+ yr old users)
No minimum age (reports to credit bureaus)
No minimum age (reports to credit bureaus)
No minimum age (only reports to credit bureaus for 18+ yr old users)
No minimum age (reports to credit bureaus)
Should be 15+ years old (reports to credit bureaus)
Should be 13+ years old (reports to credit bureaus)
It’s a teachable moment
This isn’t a selection to take calmly. In actual fact, Alejandra Rojas, a finance skilled and money mentor with The Money Mindset Hub, an internet platform designed to educate women entrepreneurs, adds a sound warning for folks who implement this strategy.
“Your credit behavior with that bank card will affect your and their credit rating,” she says. “Besides, you might be setting a precedent on your child on how a bank card ought to be managed.”
At age 2, my daughter continues to be several years away from understanding the ins and outs of non-public finance. Her physical card currently gathers dust behind a dark sock drawer (authorized users’ cards typically aren’t canceled for inactivity unless the first cardholder stops using theirs). But as she grows up, I can use the bank card as a possibility to coach her as to how money works.
So, too, can other parents: “Be certain that you are teaching your child what a bank card is, the various dates it’s best to concentrate to, the amounts it’s best to pay and the quantity you may authorize,” Rojas says.
Several rewards bank cards also include perks for the authorized user. By adding your child, you (because the parent) may have the option to get monetary savings on things like airport lounge access.
All to say: As wild because it sounds for a 2-year-old to carry a bank card, there are a handful of sensible motivations that could make it a sensible financial move on your entire family.
