Why Adding Your Kids to Your Credit Card Can be a Huge Generational Wealth Mistake, According to Experts
Written by
Karen Doyle
Edited by
Cory Dudak
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Your children are growing up and maybe even leaving the nest — congratulations! Helping your kids learn to be independent is an important part of parenting, and that includes financial independence. To this end, you may be considering adding your children to your credit card. Think carefully before you do this, however — there are risks to your generational wealth you may not be aware of.
Here’s what you need to know.
Reasons People Add Their Kids to Their Credit Card
There are several reasons that people choose to add their children to their credit card account.
Convenience
If your child is halfway across the country at college and needs to fill up their gas tank, it’s a lot easier for them to use a credit card than for you to Venmo them money. And if that car breaks down, the credit card can be used for repairs, quickly and easily.
Establishing Credit
Adding a child to your credit card gives them an opportunity to build their own credit score. They will be rated on the payment history and available credit of the card, even though it’s your account — as long as they have their own card.
Monitoring Spending
When your child uses their credit card on your account, you will see their purchases on your statement. This can lead to real-world discussions about spending habits that might not happen if you can’t see what they’re spending.
Reasons Not To Add Your Kids to Your Credit Card
The reasons you do not want to add your kids to your credit card may not be as obvious, but they may be more compelling.
Liability for Charges
As the account holder, you are responsible for all charges on your card, whether you made them or your child did. If that same college student decides to buy new furniture for their dorm room or take the whole sports team out to eat at a high-end restaurant, you’ll be footing the bill.
If you have been diligent about paying your bill in full each month, you may find that your credit card company has increased your limit on a regular basis. If you add your kids to your credit card, they also have access to that high limit, so tread carefully.
Harming Their Credit
If you run into financial hardships and cannot pay your credit card bill or you run your card up to its limit, your credit will suffer. If your child has a card on your account, their credit will suffer as well. This is the flip side of adding your kids to improve their credit — it’s a sword that cuts both ways.
Before you add your kids to your credit card, think about what that might do to your credit score and theirs, and also whether they might take advantage of a high credit limit you’ve amassed over your lifetime.
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