If you have children who need to move around independently, it may be practical to authorise them as users on your credit card, allowing them to make payments when you’re unavailable.
However, is this the right thing to do? We consider how this may benefit them, and we look at some of the downsides of doing so.
Tip: Make sure your authorised minor doesn’t drive you into debt. If you need help, click here.
Benefits to authorising a minor
According to Sbusiso Kumalo, chief marketing officer at African Bank, it’s important to incorporate financial education as part of your child’s development.
“Learning about credit and how to use it well is important and can be taught at a fairly early age. Having access to your credit card can teach your child about the process of repayments, interest rates, and how to differentiate between wants and needs,” says Kumalo.
He adds that it can also be used as a tool to teach them about the importance of not spending beyond what you – and indirectly, they – can afford.
“The main account holder can still view all of the purchases, so there’s always a level of control and oversight,” says Kumalo.
What are the downsides of doing this?
Kumalo says that if your child isn’t given boundaries when using your credit card, such as spending limits and repayment plans, it can result in poor spending habits and impart the wrong message to them.
“Minors can learn poor credit habits from an early age that will impact them for the rest of their lives. Without clear boundaries, they may think that money is constantly available for anything they want,” says Kumalo.
He adds that it can also impact the main account holder’s credit score if the account is not paid promptly. If you choose to add your child to your credit card, you need to ensure there’s an open line of communication regarding what’s purchased, and when the bill needs to be settled.
“There are also many alternatives available that will allow your child to learn about money, such as debit cards which will teach them how to budget and save,” says Kumalo.
He adds that certain accounts allow the main member to be involved in aiding and monitoring purchases, without any potential impact to their credit profile. You can reach out to your bank and find out which options they have available for you and your child.
Make sure your credit score hasn’t declined due to unpaid credit card purchases – sign up with JustMoney.