Can a Parent Co-Sign for a Credit Card?

by Neil Kokemuller
Irresponsible use by many fueled the passage of a 2009 credit card law.

Parents can co-sign for you to open a credit card account as a teen or young adult. In fact, the need to get parental help for a first card account expanded with the Credit Card Accountability Responsibility and Disclosure Act of 2009. This law forbids card companies from issuing you plastic if you are under 21 and don't have verifiable income, unless you do have a parent co-sign.

Common Motives

In some cases, parents proactively help teens get a credit card as a way to improve their credit rating and develop financial literacy. Establishing a credit payment history, especially a good one, is a driving force behind building an effective credit score as a young adult. Good credit helps you get great rates and terms on home and auto loans when you start out. Some parents also feel they can help you learn how credit works by giving you first-hand experience managing your own account.

Potential Risks

A March 2010 DailyFinance.com article adamantly argues against parents co-signing on credit cards for their college-age kids. First, if you don't make on-time payments or repay the debt, your parent assumes responsibility. Plus, the parent's credit score takes a hit along with yours, which is problematic for your entire family moving forward. Additionally, young adults often have more time to recover from delinquency or bankruptcy than their middle-age parents.

Authorized-User Option

A somewhat safer, alternative way for a parent to help you learn about credit and establish a good score is to name you an authorized user on the parent's card. This maneuver lets you use the card and gain the rewards or consequences of its use, just as your parents do. This approach may allow the parent to help you learn to use credit responsibly and pay your debts. The parent is still exposed to the risks of your poor judgment, though. Some card providers won't open accounts for anyone under 18, even with a parent co-signer, which makes the authorized-user method your only option.

Parent Co-Sign Method

A co-sign setup essentially means you and your parent open the credit account as joint owners. You share responsibility for use, repayment and credit-rating implications. Some parents open a joint account, but withhold the physical card to ensure the child gets credit-rating benefits without making mistakes. For those that qualify, a "college student card" is an alternative to the authorized user or co-sign account if you have enough income to cover the $300 or $500 limit. This card minimizes debt risks, removes the parent's burden, and allows you to build credit and learn responsible card usage.

About the Author

Neil Kokemuller has been an active business, finance and education writer and content media website developer since 2007. He has been a college marketing professor since 2004. Kokemuller has additional professional experience in marketing, retail and small business. He holds a Master of Business Administration from Iowa State University.

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