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Top 3 Mistakes Parents Make Adding Teens as Authorized Users

Parenting is a journey full of teachable moments, and introducing your teen to the world of credit cards is no exception. While the decision to add your child as an authorized user can be a valuable step in their financial education, it comes with its own set of challenges.

  1. Mistake: Neglecting to Set Boundaries Setting expectations from the start ensures that your child understands the privilege and responsibility of being an authorized user. Spending their whole allowance on V-bucks or non-tangible items is out of the question.

  2. Mistake: Not Allowing Teens to Use the Card Adding a teen as an authorized user is more than just authorizing them on a piece of plastic. You have to let them use the card! We can't add our kids and throw the card in the draw. Take the time to explain interest rates, credit scores, statement due dates, the impact of late payments, and paying the balance in full.

  3. Mistake: High Utilization on the Card  To maintain excellent credit, your credit utilization must be below 9%. That's right, 9%! So, if your limit is $1,000, the card should never carry a balance of more than $90. Many parents have heard of this credit score hack and want to give their kids the boost they never received. While this strategy can help your teen when they become a young adult, you can also hurt them without proper credit card usage. When you add your child as an authorized user, you give them the credit card's entire history, good and bad.

A young adult with a credit card
Credit cards and Financial literacy

Why Teach Teens How to Use Credit Cards:

  1. Building Responsible Financial Habits: Teaching teens how to use credit cards responsibly instills good financial habits from an early age.

  2. Establishing Credit History: Responsible credit card use helps teens establish a positive credit history, setting the foundation for future financial endeavors.

  3. Navigating the Real World: Understanding credit is a crucial life skill. Teaching teens about credit cards prepares them for the financial challenges they'll encounter in adulthood.

Adding your teen as an authorized user on your credit card is an excellent opportunity to

  • instill financial literacy

  • proper credit card usage

  • reinforce good money habits.

Avoiding common mistakes, setting clear boundaries, and providing education can transform this experience into a valuable stepping stone. By empowering them with knowledge and skills, you're not just handing them a card – you're giving them the tools to responsibly navigate the complex world of credit.

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