Credit Card for 16 Years Old

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swl4073
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Credit Card for 16 Years Old

Post by swl4073 »

I would like to give my soon to be 17 years old son a credit card to:

1) Teach him to use credit judiciously (like to buy gas for the family car or groceries on errand runs or for the movie) and pay it off when the monthly bill comes before he goes off to college.
2) Start building his credit history

I have been reading conflicting information on whether simply adding him as an authorized user (AU) to my existing credit card account will help him with goal #2 above or do I have to create a new account with both of us as co-owners or me as the co-signer on his account. Some articles said that being an AU of existing credit card will create my son's credit history while others claim that it was true in the past but no longer in recent years after the recent financial crisis.

I have the Amex Blue Cash which I can make him an AU of and it allows me to set an individual limit for his card down to as low as $200 and I can raise it higher when he goes off to college. I would appreciate it if anyone can post definitive information or share their recent experience with doing the same for their mid-teens children.
terran
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Re: Credit Card for 16 Years Old

Post by terran »

My experience has been that there is no such thing as a joint credit card anymore -- and this is trying to get one with my wife. I'm an authorized user on hers and she's an authorized user on mine.

There might be something that would let him get one with you as cosigner though I don't know either way, but someone with kids might be better able to answer that.
alex_686
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Re: Credit Card for 16 Years Old

Post by alex_686 »

Kid must be 18 to sign a contract so he can't have a credit card until that point. I have know people to fineness the issue by making the kid an authorized user, but this is of limited benefit as it does not help build a credit history.
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rec7
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Re: Credit Card for 16 Years Old

Post by rec7 »

alex_686 wrote:Kid must be 18 to sign a contract so he can't have a credit card until that point. I have know people to fineness the issue by making the kid an authorized user, but this is of limited benefit as it does not help build a credit history.
It think if they are in college they can not get one before 21 but maybe if they are 18 before college they can get one then.
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Doom&Gloom
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Re: Credit Card for 16 Years Old

Post by Doom&Gloom »

I have done exactly this with my soon-to-be 18 y/o son. I have the AMEX Blue Cash Preferred and listed him as an AU (AMEX calls them something else) 18 months or so ago. I had the same goals as you as well as wanting to remove myself from the endless loop of reaching for my wallet every time he needed money for a date, a school trip, gas, etc.

It has worked like a charm, but of course YMMV. I initially set his limit at $200 with AMEX, but, after seeing how convenient it was for him to pick up groceries, fast food, etc for us as well as wanting to give him an emergency cushion as he began to range farther and farther from our neighborhood, I raised it to $600. Of course, he has a monthly "soft limit" which is set by me for "his" expenses. Last year he surpassed that soft limit a couple of months in a row, had his credit card confiscated by me for a bit over a month, and has stayed within his spending limits since then.

Just add your son as an AU to your card and set the limits and alerts as you wish for his card. You can also create an online account for him with AMEX which will allow him to receive the periodic offers from them on his card in addition to you redeeming the same offers on your card (if they show up on both, which they usually do.) I have done this for my son even though he is unaware that his online account even exists. You could allow him to manage that account himself if you want him to be able to pay his portion of the bill directly to AMEX via their site.

Last week we had our first real crisis when he lost his wallet. After a few hours of searching and his calling the last place he had used it and being told it wasn't there, I checked his online account with AMEX. Even though it had not been used, I reported his card as lost/stolen and requested a new one. AMEX said they would send a new one and I was able to request free UPS Saturday delivery. He and some friends later went out to search the parking lot of the restaurant where he had last used it as he was afraid he had left his wallet on the top of his car as he was putting the take-out he was bringing to us in the car. No joy in the parking lot, so he went inside to ask again. This time they produced the wallet, apparently with everything intact. It was probably prudent to get him a card with a new number, and inconveniencing him a few days for his carelessness is a lesson better learned now than later in life when the stakes are higher.

It has been my understanding that the cards of an AMEX AU will establish a credit history with the CRA's since those cards have unique CC numbers. To check that out, I tried to request a free credit report in his name with one of the CRA's about a year ago, but I abandoned my efforts when I was informed that they could not process that request online--presumably because he was a minor and/or he had such a thin credit file (or none at all). I didn't want to go through the effort of filling out a paper form, but I should probably make another attempt now.

Good luck. If you have any other questions about my experience, please ask. I would not readily do this with a CC from another company, but AMEX makes it so easy with separate CC numbers for AU's, individual spending limits, and the option for a separate online account. BTW, the separate numbers for AU's makes it a snap to tell whose spending is whose at a glance.
tdogz
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Re: Credit Card for 16 Years Old

Post by tdogz »

On Point # 2:
My wife is an Authorized User on some of my cards and they are showing up on her Transunion report (as viewed on creditkarma). Of course, when I set her up as an AU, it only asked for her name, so I don't know 100% how they showed up on her report. She received cards with the same number as mine, just with her name on them. I guess that the credit card companies (Chase, Discover, and Citi) report her name and the account address to the credit bureaus as an AU and then the bureaus try to match the name and address to their existing database?? I'm not sure if the info will show up on a credit report if the AU doesn't have an existing credit history for them to match it to. I never gave any of the credit card companies her SSN, DOB, etc.
Leesbro63
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Re: Credit Card for 16 Years Old

Post by Leesbro63 »

My 25 year old was 12 when I made her an authorized user on my card. Her credit score was close to 800 when she turned 18! It's my understanding that this can't happen that way any more. But the OP is on the right track. Make junior an AU on, perhaps, a separate card that you treat as "his". When he turns 18, he can get his "real" own card (my 21 year old got one without a co-signer at 18 from Citi who is college student friendly).
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JDCarpenter
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Re: Credit Card for 16 Years Old

Post by JDCarpenter »

We added each of our sons as Authorized Users on the "family/boys card" when they hit 16 (2004-2008).

It definitely affected their credit score, and was still listed as the eldest's "oldest source of credit" when he moved off of it recently. See this 2008 article on "FICO 08." http://www.bankrate.com/finance/credit- ... nts-1.aspx This appears to still be the case, per a quick search, which yielded, among other hits, this: http://www.creditsesame.com/blog/author ... dit-score/

BTW, we never had a problem with usage, and they all continue[d] on the card until completion of education--although in grad school it is solely for emergencies or booking a flight to family event. The credit limit probably started at 5 or 6,000, and is now a bit north of 20K. Luckily, they have always known that I download transactions every night and inquire as to anything that I don't recognize. :-)
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Afty
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Re: Credit Card for 16 Years Old

Post by Afty »

My understanding is that authorized users do build a credit history (see https://www.creditkarma.com/article/how ... cts-credit). Am I missing something?

FWIW my parents had me as an AU on their credit card account when I was a teenager, and by the time I graduated college I had excellent credit. It really helped when applying for my first apartment after graduation.
alex_686
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Re: Credit Card for 16 Years Old

Post by alex_686 »

Afty wrote:My understanding is that authorized users do build a credit history (see https://www.creditkarma.com/article/how ... cts-credit). Am I missing something?.
That is the way it used to be. The credit repair schemes abused that loophole, where people could "rent out" their good credit by making person with bad credit an authorized user on their credit. All of a sudden, the person with the bad credit would show that they had been managing their credit cards successfully for years. And by "authorized" in this scheme, I mean authorized for a token amount..

I think you have the article backwards. It is talking about how authorized users will appear on your credit report, not the other way around.
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Tycoon
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Re: Credit Card for 16 Years Old

Post by Tycoon »

My oldest has been an authorized user on one of my cards since she was 16. When she turned 18 she pulled her credit and it showed the card and a history.

My youngest is an authorized user on one of my wife's cards. I expect he will have a credit history when he turns 18.
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Louis Winthorpe III
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Re: Credit Card for 16 Years Old

Post by Louis Winthorpe III »

terran wrote:My experience has been that there is no such thing as a joint credit card anymore -- and this is trying to get one with my wife. I'm an authorized user on hers and she's an authorized user on mine.
I've been able to make my wife a joint card holder on some of mine. I'd be a little surprised if it isn't possible anymore -- there's a benefit to the card company and no downside that I can think of.
terran
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Re: Credit Card for 16 Years Old

Post by terran »

Louis Winthorpe III wrote:
terran wrote:My experience has been that there is no such thing as a joint credit card anymore -- and this is trying to get one with my wife. I'm an authorized user on hers and she's an authorized user on mine.
I've been able to make my wife a joint card holder on some of mine. I'd be a little surprised if it isn't possible anymore -- there's a benefit to the card company and no downside that I can think of.
Yeah, I dunno. If I recall TD Bank, Capital One, and American Express Bluecash all said no. They all do authorized user accounts, but the primary is the person the account actually belongs to.
Louis Winthorpe III
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Re: Credit Card for 16 Years Old

Post by Louis Winthorpe III »

alex_686 wrote:
Afty wrote:My understanding is that authorized users do build a credit history (see https://www.creditkarma.com/article/how ... cts-credit). Am I missing something?.
That is the way it used to be. The credit repair schemes abused that loophole, where people could "rent out" their good credit by making person with bad credit an authorized user on their credit.
My understanding is that authorized users still do build credit history, but it's limited to members of the same household. Relatives (same last name) are fine.
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Doom&Gloom
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Re: Credit Card for 16 Years Old

Post by Doom&Gloom »

To add to my previous post itt, I just tried to pull my 17 y/o's report from all 3 agencies. Trans-Union and Equifax had no credit history for him, so no report was available. Experian (which AMEX usually reports to IIRC) informed me that they could not release the report online and asked that I submit a written request. Time will tell if they have any information to release or if that was simply boilerplate. I will try to remember to update here.

His AMEX card reports his "Member Since" date as 2013 so if he does have any credit history established, it would seem that, at best, it is with only one CRA.
guardianangel
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Re: Credit Card for 16 Years Old

Post by guardianangel »

Why do you need him to get a credit card when a debit card can do the same thing? He will have the convenience of a credit card and it is far better to learn how to use the money you have right now instead of borrowing money and paying it back next month. Why do you want him to "build" a good credit score at such a young age? So he can get into debt for other things like a car or a new computer? The best thing you can teach a 16 year old is to spend less than he makes (or has in his account), have an emergency fund, and to benefit from compound interest instead of giving interest to the banks. In other words, to avoid debt. He can open a checking account at your bank, get his very own debit card and since he is under 18, you will have on-line access to his account to monitor his transactions. You can also easily transfer funds into and out of the account and there is no way he can spend more than he has.
tbradnc
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Re: Credit Card for 16 Years Old

Post by tbradnc »

I got both of my children Capital One secured credit cards with a $200 limit when they turned 18. Prior to that I was a joint owner of their checking account and gave them the debit card.

My 20 year old daughter just got a pre-approved Amex Simply Cash offer with $250 signup bonus a few weeks ago and just got the card. The secured card she had the previous 2 years was reported to the credit bureaus and show up on her credit report.
PS241
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Re: Credit Card for 16 Years Old

Post by PS241 »

I would encourage your child to get a job and a debit card instead of hooking him up with a credit card. Although I would say one of my biggest money lessons was also from debt.

I bought an $11k car at 16 with a down payment of $1500 and my parents helping with $1500. The rest I had to pay for myself. I am not sure how the loan was set up as it was in my name, but I suppose my dad was a co-signer on it. The bank gave me a "little debt book" that had a paper slip for each months payment. The payments were around $200 which at $5.15 an hour felt huge. I remember bringing in the first couple payments and thinking this book had an "endless" amount of $200 slips. I wanted to get rid of those slips as fast as I could. I made double, triple, quadruple payments and was very happy when the loan was paid off and that booklet was still half full.

To this day, I am quite debt-averse, but I suppose it could have gone the other way and I could have just paid minimums.

Not sure that my story helps, but it was fun to relive! :sharebeer
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swl4073
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Re: Credit Card for 16 Years Old

Post by swl4073 »

Thank you very much for all your insights and experiences. They are very helpful in solidifying my plans for my kids.
nordlead
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Re: Credit Card for 16 Years Old

Post by nordlead »

guardianangel wrote:Why do you need him to get a credit card when a debit card can do the same thing? He will have the convenience of a credit card and it is far better to learn how to use the money you have right now instead of borrowing money and paying it back next month. Why do you want him to "build" a good credit score at such a young age? So he can get into debt for other things like a car or a new computer? The best thing you can teach a 16 year old is to spend less than he makes (or has in his account), have an emergency fund, and to benefit from compound interest instead of giving interest to the banks. In other words, to avoid debt. He can open a checking account at your bank, get his very own debit card and since he is under 18, you will have on-line access to his account to monitor his transactions. You can also easily transfer funds into and out of the account and there is no way he can spend more than he has.
debit cards are just as bad as CC's if you are concerned about them spending money they don't have. Many debit cards will allow you to overdraft and then charge hefty fees much worse than a CC interest rate of 20%. Debit cards also provide less protection from fraud, and typically don't give good rewards (2% cash back citi card for example).

Having a CC doesn't mean you go in debt, it just means you float the bill, like you do with your utilities or other bills. If you monitor a kids CC and make sure it is paid in full every month they'll figure it out pretty quick.
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papiper
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Re: Credit Card for 16 Years Old

Post by papiper »

I added each kid to one of our credit cards when they started to drive. They could only use it for gas and errands we sent them on (like groceries). We stopped using it, so we could easily see what was charged. They had to use cash for their personal expenses which I believe made them much more aware of making good choices than their peers that just pulled out plastic.

They are all in their twenties now, and while just signing in under ours didn't fast track a credit history, when they went out in the world and bought that first car and rent, they had zero problems because they could show employment. By the time they started looking at houses, they had their own credit history as adults.
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Doom&Gloom
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Re: Credit Card for 16 Years Old

Post by Doom&Gloom »

Doom&Gloom wrote:To add to my previous post itt, I just tried to pull my 17 y/o's report from all 3 agencies. Trans-Union and Equifax had no credit history for him, so no report was available. Experian (which AMEX usually reports to IIRC) informed me that they could not release the report online and asked that I submit a written request. Time will tell if they have any information to release or if that was simply boilerplate. I will try to remember to update here.

His AMEX card reports his "Member Since" date as 2013 so if he does have any credit history established, it would seem that, at best, it is with only one CRA.
Updating as promised: He received his Experian credit report in the mail today. His AMEX card on which he has been an AU for two years is not reporting. However, I was surprised to see that a Chase AARP which my wife opened in March and added him as an AU is reporting for him.

I had forgotten that she named him as an AU since she "sock-drawered" his card when it arrived. He is not even aware of its existence. She will likely give it to him to use when he goes off to college in the fall since it has the lowest limit of any of her Chase cards and also has the bonus rewards categories which he is most likely to use. I would like to be present when he whips out an AARP credit card in front of his new college friends :mrgreen:
ww340
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Re: Credit Card for 16 Years Old

Post by ww340 »

I applied for a new chase card last year. I added my son as an authorized user, and planned to give him the card, but when I got the cards it had a $17,000 credit line. I decided not to give the card to my son.

Several months later he called me all upset that his identity had been stolen. He said his credit report shows a chase card. He said the credit card has actually improved his credit, but that he did not apply for one.

The card was a chase Freedom card. He now has been able to get his own low limit credit card with Capital One.

So it looks like Chase cards do report for the authorized user.
leonardotmnt
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Re: Credit Card for 16 Years Old

Post by leonardotmnt »

Building a credit history is good for things other than incurring debt. They can affect auto and home owner's insurance rates or the ability to be hired in some instances.

From what I understood last year when I added my wife to a couple of my accounts as an AU, it does help the person establish a credit history and will help their score but lenders may not weight it as much as being the primary card holder. Most cards (aside from Amex I believe) start the date of the AUs history as the day you make them an AU. My wife's score was definitely improved and it showed up on her credit report when I added her.
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