Should You Get an Add On Credit Card for Your Child?
The law does not prohibit you from adding your child’s name to your Credit Card account provided the child is over 18 years of age.
Can your child apply for a Credit Card in their own name? The eligibility criteria is such that they should have a good credit score. It is a classic Catch 22 situation. You cannot accumulate a good credit score without access to credit because prompt repayment of the loans is one of the clinching factors that decide your credit score. At the same time, you cannot get loans without a good credit score. Is there a solution to this problem? Yes, adding your child’s name to your Credit Card is one way. You can do so by getting an Add On Credit Card for your child. We shall see how it is possible.
• Help build up your child’s credit score: When you add your child’s name to the Credit Card, the child becomes a co-borrower. The banks report every borrower’s name and credit details to the credit bureaus. It enables the children to build up their credit history. Once they build up their credit score, they can Apply for a New Credit Card online.
• Inculcate fiscal discipline in your child: Adding your child’s name to your Credit Card account is the best way to teach them fiscal discipline. It can hold them in good stead in the future when they apply for Credit Cards in their names.
Let us see whether your child is ready for inclusion as a joint account holder in your Credit Card account.
• It is essential for your child to imbibe qualities to handle financial responsibilities in the future. Adding your child’s name to your account is one way of ensuring it. It builds up the element of trust and brings in the sense of responsibility to the child.
• Can you trust your child with the responsibility of maintaining a Credit Card account? Does the child have the habit of reckless spending? Does your child follow the rules you have set? You should have satisfactory answers to these questions before you entrust your child with the Credit Card.
Set These Guidelines for Your Child
- Set a ceiling for your child to spend
- What are the things they can purchase?
- They should inform you before purchasing it
- Who will make the payment for the purchase?
- How long will the arrangement last?
The answers to these questions should set the guidelines for the child to follow.
Should You Have a Separate Account?
Should you add your child’s name to your existing Credit Card account or should you open a separate account? It is better to have a separate account. It ensures that you do not mingle the transactions. In case you use your existing account to add your child’s name, make sure to maintain a buffer to prevent the purchases from going over the limit.
It is better to add your child’s name to the account that has a good credit history. After all, your objective is to help your child build up your child’s credit score.
Let the Child Understand its Responsibilities
Maintaining a Credit Card account entails your child to become responsible. It involves understanding the concept of the minimum payment due and other important terminologies. The child should also realise that it should not disclose the PIN or the CVV number to any unauthorised person.
Teach the child not to use the cash advance facility frequently. The child should know that the facility attracts interest from the moment you withdraw money from the ATM. Also, the cash advance facility entails payment of a cash advance fee.
Remember that you are a co-signer to the Credit Card account. The bank has the right to demand the payment from you in case the co-borrower defaults in the payment. Being the primary account holder, youare responsible for the payments.
How Will Adding Your Child’s Name boost its Credit Score?
The banks have to report the credit details of all borrowers to the credit bureaus. It includes the repayment details of your loans and Credit Card payments. Your child is a co-signer along with you in your Credit Card account. Hence, the child has a separate credit report profile. The payments you make into the Credit Card accounts reflect in the child’s profile as well. If you make regular payments, it helps build up the child’s credit score. It can help the child to apply for a Credit Card online in their name in the future.
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