Here's When Experts Say a Child Should Apply for a Credit Card

Remember when you took out your first credit card? Chances are, you were a fairly young adult, and perhaps, a bit naive about money. If you were fortunate, your family prepared you to handle your finances while you were still living under their roof. If not -- like many of us -- you were left to your own devices.

Here's where leaving us to our own devices has led. According to BadCredit.org, nearly 20% of Americans have a subprime credit score. That means they're considered high-risk borrowers, and if they do land a credit card or personal loan, their rate is higher (sometimes, much higher) than a borrower with a good credit score.

There's no shame in being a subprime borrower. Some people experience a credit score hit due to circumstances totally beyond their control. For example, none of us controls whether we're laid off from our jobs or come down with a chronic illness. The same is true of our children. No matter what we do, we can't control every hardship they will face. However, we can teach them to manage their finances in a way that makes bumps in the road a little easier to manage. We can teach them to make their credit cards work for them, rather than the other way around.

The right age, according to credit card companies

Just like a checking or a savings account, a child cannot have a credit card in their own name before the age of 18. However, they can become authorized users on their parent's or guardian's credit card. The age at which that is allowable depends on the credit card issuer.

How your child can benefit

Allowing your child to become an authorized user on your credit card is about more than being the "cool" parent. Here are four real-life ways it can help.

By making safer purchases

Paying by card is typically safer than paying with cash. There are consumer protections attached to credit cards that don't otherwise exist. For example, credit cards provide purchase and fraud protection, greatly diminishing the odds of being ripped off or losing out because they purchased a lemon of a product.

By learning the rules of the road while still under your guidance

One thing that comes as a surprise to some adults as they manage their first credit card is how quickly interest piles up. If your child is using the credit card under your careful watch, you have the opportunity to teach them the value of paying it off in full each month so that interest never has a chance to build up. They can also learn about credit limits, buying only what's necessary, and protecting the card so that it's never stolen.

By building a positive credit history

Roughly 20% of American adults have no credit history and no credit score. That means landing a loan from a reputable lender may be difficult or even impossible. Once a child is an authorized user on your credit card, each payment you make on the card gets reported to the credit reporting agencies in your name, and in your child's name. Becoming an authorized user makes it possible for your child to leave high school with a healthy, established credit score.

By having an emergency payment method

Imagine your child stuck in a bad situation, and unable to afford to get out. It may be something as simple as a broken down car on a road trip with friends. Whatever's going on, as long as there's plenty of available credit on the card, your child can pay to get home.

The reason age requirements vary so dramatically among credit card issuers is likely because every child develops at a different pace, and only you know if your child is ready. Once you believe it's time, you can take comfort in knowing that you're teaching your child important money-management skills that most people don't learn until they're full-grown adults.