Frequently Asked Questions About Credit Cards for Kids
How old do you have to be to get a credit card?
To open a credit card in your name in the US, you must be at least 18 years of age – an adult. This applies to both secured and unsecured credit cards.
However, it may be frustrating for some to open a credit card before the age of 21, especially if it is not secure. This is partly due to the Credit Card Liability and Disclosure Act of 2009, which effectively prohibits anyone under the age of 21 from opening a card unless they have sufficient proof of stable income that they can use to pay their bills.
What is a good credit limit for a first credit card?
A good credit limit on your first credit card is around $1,000.
This may not sound like much, but for most teenagers it should be more than enough. My first credit card offered me an initial limit of $500, which was enough for how I used it then. And with some good repayment habits, my limit increased to $1,500 within two years.
At what age can you start lending?
You can start building your credit as soon as you are born. A child can start their credit journey by adding their social security number to an existing credit account—usually the parent’s account. The most common method is to add a child as an authorized user by credit card.
Read more: How to get a free credit report and credit score
What is an authorized credit card user?
If you apply and open a credit card, you are the “primary” cardholder. Authorized users are “secondary” cardholders.
As a primary cardholder, you can add authorized users to your card, which enables them to use your line of credit. Parents often add their children as authorized users for various reasons, which we will discuss in a moment.
Each credit card issuer sets a specific age limit for authorized users:
- American Express – 13 years
- Bank of America – no minimum age
- Capital One – no minimum age
- Chase – no minimum age
- Citi – no minimum age
- Discover – 15 years
- US Bank – 16 years
- Wells Fargo – no minimum age
In most cases (with the exception of Citi), you will need to provide the authorized user’s social security number, as well as their name and date of birth.
Do authorized users create credit?
Authorized users will create credit. However, the credit history they receive as an authorized user reflects the credit history of the primary cardholder. If the primary cardholder is late with their credit card payment, the authorized user’s credit history will be corrupted.
Adding an authorized user is only recommended if the primary cardholder has good credit habits.
Read more: Can being an authorized user help you earn credit?
Can adding an authorized user hurt my credit?
Adding your child as an authorized user to your credit card means they can use your line of credit – and essentially spend your money – when their card arrives in the mail. If you’re not careful, you might find a tab you weren’t expecting. If you fail to repay it, you will incur interest. And depending on the size of your balance, your credit score may even drop.
However, there’s nothing wrong with adding your child as an authorized user and then cutting their card apart when it’s received. After all, they don’t need to use the card to create credit.
Read more: Authorized cardholders – pros and cons
How safe are credit cards for kids?
Compared to other payment methods, credit cards are actually one of the best options for kids. Unlike debit cards and cash, there is no real harm if your child loses their credit card. You can simply cancel an authorized user’s card and order another one.
The obvious downside to a credit card is that it’s a little harder for kids to understand the principles of budgeting when they can’t see a wad of cash or even a bank account balance as it runs out.
Frequently Asked Questions about Debit Cards for Children
What are the benefits of debit cards for children?
The main benefit of using a debit card for children is that a debit card can teach fundamental financial lessons. If a child withdraws money from his own bank account, he may see the money drain from his precious balance and he cannot spend more than he has saved.
How old do you have to be for a debit card?
Most banks apply some sort of age limit for debit cards, often around 13 years old. However, you can find kid-friendly cards with a minimum age of six.
Obviously, the child will still need an adult parent or guardian to supervise the account.
Do debit cards make credit?
Most debit cards do not help their users accumulate credit. Traditional debit cards simply take money out of your bank account to pay for your purchases—no credit required.
However, a new breed of debit cards is gaining popularity. These cards work similarly to secured credit cards. Here’s what they do:
- They give you a line of credit equal to your bank account.
- When you swipe with a debit card, it gives you a one-time credit line for that purchase.
- The next day, the card will pay off by withdrawing money from your bank account.
- So you are technically using credit but spending your money just like you would with a debit card.
How safe are debit cards for kids?
Debit cards are inherently less secure than credit cards. If you lose your debit card, you must report it immediately or you could end up losing a serious amount of money. If you report a missing debit card even three business days after it was lost or stolen, you will receive a fine of up to $500 under federal law.
Now debit cards are still more secure than cash. But then again, your kids are probably not walking around with a few hundred dollars in cash.
Frequently asked questions about prepaid cards for children
What are the benefits of prepaid cards for children?
Using a prepaid card is a great way to help your child save money. Spending is limited to the amount of money you upload to the card, and children must do so until you decide to upload more money for them.
How old do you have to be for a prepaid card?
Many prepaid card services have a minimum age, but there are others that do not. With companies like Greenlight, you can create a prepaid card for kids of all ages.
However, age limits for cards aimed at children, often around six years old, should not be too restrictive. In any case, not many children under this age will care about money or understand its value.
Do prepaid cards create credit?
We are not aware of any prepaid card currently on the market that increases credit. The closest approximation to prepaid cards for creating credit are secured credit cards, which provide a line of credit corresponding to a portion of the money you deposit as collateral, or the aforementioned debit cards for creating credit.
How safe are prepaid cards for children?
Prepaid cards are slightly safer than debit cards for one reason: they are not tied to a bank account. They only have as much money as you put into them. So if you want to give your child $100 a month, that’s all you’ll lose if the card is stolen.
Summary
The ideal payment card for your child depends entirely on their age and the stage of life they are entering. But whether you’re a kindergartener or a college student, there are always steps you can take as a parent to help your kids on their financial journey.
We offer the following strategies for different ages:
Age 0-12
When they are too young to fully understand the value of money, you can still add the child as an authorized user to your credit card and cut it when it is received. They will immediately start getting good credit from your positive financial habits.
13–17 years old
When they start receiving token benefits and doing housework, you can open a prepaid or debit card for them and show them the value of work and savings.
Age 18+
When they reach adulthood, you can encourage them to open a secured credit card or a student credit card with a managed credit limit. After a few years of responsible use, they will probably be able to upgrade to a real unsecured credit card.
By gradually introducing different types of payment cards into your child’s life, he will already have a solid credit score and good financial habits when he is old enough to be truly financially independent. They can even get auto loans and other lines of credit without your signature!
