Your sister-in-law is not alone: A number of TikTok influencers using the hashtag #generationalwealth are recommending adding your child as an authorized user on your credit card as a “hack” to help them establish a credit history.
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A credit score provides a measure of creditworthiness — how likely you are to pay back debt — to lenders. This score is based on a number of factors, including payment history and credit mix, but a higher score can give you easier access to credit and better rates on loans.
Adding a child to a parent’s credit card allows the child to piggyback on the parent’s credit history, but the child isn’t responsible for paying back any of the debt (that falls to the cardholder). This is different from opening a joint account, in which both parties would be responsible for the debt.
Why are parents adding their kids as authorized users?
Young adults who establish a credit history early in life may have an easier time applying for credit, taking out a loan, renting an apartment and, down the road, getting a mortgage. While some may question whether this gives them an unfair advantage, it’s an advantage they may need more than ever.
Wages are stagnating, with 73% of U.S. workers “struggling to afford anything beyond their basic living expenses,” according to a recent Resume Now study. With high housing costs and mortgage rates, the dream of homeownership is dying, and the threat of tariffs and a possible recession has led to plummeting consumer confidence.
It’s tough for young people out there. So, by adding a child as an authorized user, the child inherits the parent’s or guardian’s credit history — without having to fill out an application or undergo a credit check. This, of course, is only helpful if the parent and child use the credit card responsibly.
"Typically, the entire account history will show up on the authorized user’s credit report," said Gerri Detweiler, credit expert and author, to U.S. News. "If the primary cardholder has a good payment history and low debt, that can be a tremendous benefit."
Some credit cards allow authorized users as young as age 13 or 15, while some have no minimum age requirement.
“Kids whose parents earn $100,000+ are nearly 5 times as likely to be an authorized user on their guardian’s credit card than those whose parents earn less than $35,000 (37% versus 8%),” according to a LendingTree study. “Overall, 22% of parents say their minor child is an authorized user.”
But this strategy doesn’t just apply to wealthy families who want to pass down generational wealth. It could be a strategy for anyone with a good credit history — and who’s willing to take the time to teach their kids about money management.
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Pros and cons of adding an authorized user
Aside from jumpstarting your child’s credit history, adding your child as an authorized user on your card is also an opportunity to teach them how credit works and how to be responsible with money.
For example, say your teenager gets an allowance or has an after-school job. If they’re an authorized user on your credit card, they can use it to make a few purchases — provided they pay their portion of the bill at the end of the month. Adding a baby or toddler may be somewhat more questionable.
But there are a few drawbacks to consider. Say your 10-year-old niece racks up $5,000 in online purchases on her mom’s credit card without fully understanding the consequences. Her mom would be liable for the charges.
If your kids regularly use your card, it could increase your credit utilization rate (which makes up about 30% of your credit score). That could end up hurting your credit score. And if you end up in a position where you’re carrying a high balance that you can’t pay off, it could hurt your child’s credit history along with your own.
Also, not all credit card issuers report authorized users’ activity to the three main credit bureaus — Experian, Equifax and TransUnion — until they turn 18. That won’t help them establish a credit history, so you’ll want to check with your issuer first.
Another consideration is that eventually, when your child grows up and becomes financially independent, removing them as an authorized user could temporarily ding their credit score (a credit score is based, in part, on your payment history and length of credit history).
“Keep in mind that your credit may be affected after the removal,” notes Experian. “If it was a card with a long history and you don’t have any other accounts of similar age, or you have little credit otherwise, you may see a drop in your credit score.”
Plus, some lenders may not give much weight to an authorized user who’s applying for credit. If you’re not the primary account holder, it means you haven’t gone through a credit approval process, so the lender may still question whether you’re able to manage payments.
So you don’t need to feel guilty about your decision. You may instead want to help your kids apply for a starter credit card or credit-builder loan — where the account is in their name — to build a credit history through responsible borrowing and repayment.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
