Helping Your Teenagers Build Credit

November 20, 2023  | By David Lowe

Parents often have questions about the best ways to help their kids develop wise money habits. Common questions relate to when and how to start teenagers down the path of responsible credit card use.
Teens under 18 cannot open a card in their own name, but parents can add them as authorized users on their credit cards.  Some companies set the minimum age requirement at 16, and others allow teens as young as 13 to be authorized users. This is a great way to help your teenagers start building credit in their name before they turn 18.

To help them establish a good credit history, make sure they buy something with the card once a month. It also is essential to pay off the balance completely (and on time). Help your kids start this habit now so they will carry it with them throughout life!

Once teenagers turn 18, here are some best practices:

Help them open an entry-level card aimed for “students” with new credit.

  • Nerdwallet is a good resource for evaluating credit cards. See “4 Excellent Student Credit Cards of 2023” for more details.
  • Consider the perks that various cards offer. As just one example, the Capital One Student Cash Rewards Card offers a $0 annual fee, a low credit requirement, $50 of introductory bonus funds, a complimentary Uber One membership and high bonus categories applicable to teenagers.

Consider taking your teen to sign up at a local credit union or banking institution for a very small student loan — even if you don’t need it!

  • Student loan interest often is deferred while the student is enrolled at least “half-time.”
  • Take these dollars and invest them in short-term CDs, an online high-yield savings account, or short-term, high-quality bonds.
  • When your teenager graduates, he or she will have accrued some “free” monies from the interest and will have boosted his or her credit score by diversifying to a different credit source than just the credit card. Also, they can pay back the loan immediately.
With a few simple steps like these (and patient mentorship along the way), teenagers can become pros at using credit cards to their advantage. You can help your young adult establish savvy credit practices today.
David Lowe, CFP®
512-467-2000, ext. 111   |  [email protected]

David joined Austin Wealth Management in late 2021 as a financial planning associate. He has been interested in personal finance for years and holds the CERTIFIED FINANCIAL PLANNER™ designation. David’s interest in investing began in his teenage years through conversations with…Read More

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