Editorial Policy

Is your adult child ready for authorized card user status?

Erica Sandberg

September 16, 2014

QHi Erica,

I have a federal credit union credit card that I religiously pay to the penny every month. It is my only card, and I've had it since 2003 when I started working for the school district. My daughter is in college as a freshman, and I would like to let her have a card on my account. Can I do this and what should I know first? –Zia

ADear Zia,

So you want your daughter to become an authorized user on your personal credit card account? That shouldn't be a problem. Many credit issuers let owners add other people to their accounts. Not all do, though, so ask your federal credit union if it does.Ask Erica

In the event that it allows such arrangements, you would only need to provide your daughter's full name, mailing address, date of birth and possibly her Social Security number. After that, they will send her a credit card with her name on it, and she can begin charging right away. The credit union will not check her credit report and scores to see if she is eligible for the account because it's already been granted, and the ownership doesn't change from individual to joint status.

As an authorized user, your daughter would be a special guest on the account. Just like you, she would be able to use the card to make purchases, but she would not be liable for the funds she borrowed. If the account goes delinquent, the credit union could not pursue her for payment, nor sue her for damages. You, as the sole owner, would be hit, even if she was the one to run up the bill.

The two of you will most likely experience combined credit report activity. Issuers usually supply information about the account to the owner's as well as the authorized user's consumer credit reports with the three major credit unions. If the main reason you want your daughter to have access to your account is so she can build a positive credit history, make sure that the credit union does provide borrowing and repayment activity to the user's file. Assuming it does, the account will show up as soon as she has rights to the account.

Manage the card well, and your daughter will benefit, as everything about it will be factored into her credit scores. This is called piggybacking, and it is a common way for parents to help their young adult children establish credit. As your daughter builds her credit with your well-managed card, she becomes more attractive to lenders and other credit card issuers.

Before just handing your daughter a card that's attached to your account, though, I strongly suggest forming a friendly contract that spells out the terms. In a letter or email, explain what she may use the card for, whether you expect to be repaid and if so, when, plus the maximum that she's allowed to charge in a given month. Be specific. Are groceries and school supplies OK, but kegs and hotel rooms not? Say so! Remember, this is your account, so she must abide by your rules.

The good news is that if she abuses her privileges in any way, you can revoke her card with a swift phone call or letter to the credit union. You won't need to pay the balance to zero before the card is deactivated, nor is her permission or even knowledge required.

In the event that you go through with this deal, keep a keen eye on your statements so you can spot any problems before they spiral out of control. Hopefully, your daughter will treat the account perfectly, so that won't be an issue. Then, by the time she graduates, the constant stream of charging and repaying in full and on time — whether done by her or you — will be recorded and she'll be able to qualify for her own card. Remove her from your account and let her fly independently.

Got a question for Erica? Send her an email.