A baby with a credit card?

Many authorized user accounts have no minimum age requirement

Most U.S. credit card companies do not provide individual credit card accounts to minors, because children are not able to enter into legal contracts. Parents who want their minor children to have a credit card can get them a card that is linked to the parent’s account. The minor holding an additional card is called an authorized user.

Typically, authorized users are relatives or friends of the primary cardholder. For example, a parent might add a son or daughter to a card account to provide access to credit or for use in emergencies.

Some card issuers have a minimum age for authorized users, while others have no age limit. This year Consumer Action added a new question to its survey in order to determine bank policies for authorized users. The answers revealed that 75% of surveyed issuers had no minimum age requirement for authorized users.

American Express will not issue authorized cards to young people until they reach age 15; First Command Bank’s minimum age is 16, and Arkansas National Bank, GE Money Bank and Pulaski Bank & Trust require authorized users to be at least 18.

“The authorized user relationship can be a good way to teach young people about the use of credit, but to have no minimum age when issuing credit cards for use by minors is not a responsible policy,” said Consumer Action's Linda Sherry. “What use does a small child have for a credit card?

She noted that being an authorized user does not always result in a good credit history. Parents who start off with good intentions may default, or pay bills late, and saddle their child with a bad credit history.

Real cards for teens?

According to Dr. Robert Manning, author of Credit Card Nation, “Card companies encourage fantasies of easy money because students are so profitable. Teens have financial naïveté, high material expectations, responsiveness to relatively low-cost marketing campaigns, high potential earnings, and future demand for financial services. Not surprisingly, companies are approving credit lines for students at progressively earlier ages, including high school seniors.”

Manning says that children’s names, addresses and other information can turn up in the databases used by issuers to market credit cards and he charges that kids as young as 16 can get cards without parental permission.

Consumer Action is interested in hearing about any cases in which young people under 18 have been issued primary credit card accounts. Sherry invites anyone who can provide proof that this has happened to send her an email at .

“We hear that people under 18 are being issued credit cards under their own recognizance,” said Sherry. “We’d like to know if companies are acting irresponsibly so that we can blow the whistle.”

While the companies would not legally be able to collect on the debt, they could ruin the young person’s credit, or apply enough pressure to get his or her parents to pay the debt.

View the full survey results

This story ran on Consumer Action on May 23, 2007.