It’s natural for parents to want to smooth the road to adulthood for their children. Financially, one way to do that may be to co-sign a credit card so your child can more easily access the credit they need to cover unexpected expenses, furnish their home or otherwise pursue their dreams.
However, co-signing a credit card comes with risks for both you and your child. You could end up saddled with significant debt if your child defaults on their balance while they may miss out on the character-building experience of managing money and building credit on their own.
Before you co-sign a credit card for your child, be sure you understand both the potential benefits and pitfalls.
What is a credit card co-signer?
A credit card co-signer is someone who promises to pay the balance on a credit card if the primary accountholder cannot or does not for any reason.
While not exactly the same as a joint account owner – a co-signer doesn’t typically get a card for spending purposes – they serve a similar purpose. It provides assurance to a credit card company that a balance will be paid off.
A co-signer may make it possible for someone to receive a credit card even if they wouldn’t qualify for one on their own.
Can you co-sign a credit card?
Before you think about co-signing a credit card, consider the following:
- Your relationship to the person asking you to co-sign.
- How well they manage their money.
- Their ability to pay back what they owe.
- What affect it will have on your relationship if they fail to make payments.
Remember, if they pay their bill late or miss payments altogether, your credit could suffer. What’s more, you’ll be legally obligated to pay off the balance if they don’t.
Perhaps because of the potential pitfalls of co-signing a credit card, not many companies offer this option anymore. Even if you want to co-sign for your child, it could be difficult to find a credit card allowing you to do so.
Which credit card issuers allow co-signing?
No major credit card issuer advertises the ability to co-sign on a credit card. There are some reports online that Bank of America will allow parents to guarantee a child’s credit card in a way similar to that of a co-signer, but this option seems to be offered on a case-by-case basis after a young adult’s application is denied.
If you want to co-sign a credit card, your best bet may be to talk to a local credit union or community bank. They may be most likely to offer this as an option nowadays.
Can I get a credit card for my child?
Learning how to use credit wisely is an important financial lesson for children, but it may be one that has to wait until they are older. Since opening a credit card involves a legal obligation to repay the debt, minors generally cannot hold an account in their own name.
In that case, using a debit card such as the CardName might be a good way to start teaching financial lessons. Then, at age 18, they may be better prepared to get their own card or co-sign an account with you.
Alternatives to co-signing a credit card
Since opportunities to co-sign a credit card seem to be few and far between today, you may need to consider an alternative to help your adult child access credit. Joint ownership, authorized users and secured credit cards are all options that may work for your family.
Co-signer vs. joint account
Joint ownership is similar to co-signing a credit card but not exactly the same. When you co-sign a card, you are guaranteeing the balance will be paid. As a joint owner, you have equal rights with your child to spend up to the credit limit and manage the account.
As with co-signing, relatively few credit card companies allow joint ownership. U.S. Bank and the Apple Card are two examples of issuers that allow for co-owners to be added to an account. However, you’ll need to first open an account in your name and then add the joint owner.
Co-signer vs. authorized user
A more popular – and widely available – option is adding a child as an authorized user to an existing account. Authorized users are able to use a credit card but are not legally responsible for paying off the balance. For this reason, even minors can be added as authorized users on credit card accounts.
Adding an authorized user is a simple process, and your child can receive their own card to use. Their credit score also benefits from your timely payments on the account. For many parents, this is a simple way to help their child establish credit.
Co-signer vs. secured credit card
If you don’t want to be legally obligated to pay back what your child spends, encouraging them to get a secured credit card is another option worth considering. Although it may not be as appealing from your child’s perspective, it is proven way to build credit.
With a secured credit card, your child will have a card in their name alone. The card will request that they make an initial security deposit, and their credit limit will be equal to that amount. Once they have established a pattern of timely payments, they may be automatically upgraded to an unsecured card.
Parents who want to provide some extra motivation for their children to go this route may offer to pay a portion or all of the security deposit. This can be done with the understanding it will be returned to them when the credit card is closed or converted to an unsecured account.