Should My Daughter Have a Credit Card?

I’m a girl dad with two newly minted adult daughters. I write about personal finance, so when my wife recently asked if our girls should have their own credit card, a few synapses started firing.  Our daughters have been authorized users on our card for a few years so that they have an emergency safety net (and start building a credit score).  As a family, we pay for most things via debit card and have taught them the same, so they appreciate how finite money is. But yeah, they probably should have their own credit card, and there are a few reasons why.

Independence from a Spouse

I’ll get to credit scores and such in a minute, but let’s talk defense first. Divorce is the fastest way to financial hardship and even poverty for a woman. The deck is stacked against women, especially in military families.  Women often delay, downgrade, or completely defer a professional career to prioritize their husband’s military career while raising children for years.

While this is often wonderful for the family, if the marriage later dissolves, the woman frequently has a big hole to dig out of. If she isn’t the family “CFO” (Chief Financial Officer) she may not know what accounts, loans, and assets exist to even lay a claim in a divorce.

Alimony is increasingly rare, so a woman with little work or financial history may truly struggle to make ends meet.

How does a credit card help? By itself, it doesn’t. But if a woman has her own credit card, in her own name, along with one or more bank accounts, and hopefully an IRA, then the foundation of financial independence is a bit less shaky.

Cards and accounts are one thing, but flight following transactions, payments, and how dollars are invested can ensure that a recent divorcee isn’t heading into the financial wilderness for the first time as an adult.

Interdependence with a Spouse

One of the best pieces of advice my 24-year-old self received was to merge all finances at the start of a marriage. It’s worked great for 26 years. Many techniques allow spouses to have “blow money,” separate accounts, and individual credit cards, but none of them require secrecy.

A common technique is to have all paychecks and other income flow into a single joint account, then move “blow money” or “his and hers money” to separate accounts.  Ideally, the separate accounts are also joint, but that’s not a must. What’s important is that both spouses have logins and access to all accounts (and cards) in the family.  Joint and transparent family cashflow operations both hedge against financial infidelity and require both spouses to keep skin in the game for sound family finances.

How does a woman’s independent credit card fit into this interdependence? She doesn’t need to use it much, and like all family accounts, it should not be hidden, but it creates the start of an independent financial life if the worst happens to the marriage.

Credit Score & Credit History

As much as I hate it, the use of credit scores as a proxy for social and financial reliability isn’t going away anytime soon. Credit scores, which should be called debt scores, are built from the following criteria:

1. Length of time you’ve had access to credit.
2. Number of credit cards and loans you have.
3. The amount of your available credit you’re using.
4. Adverse payment history, if any.
5. Number of recent “hard queries” that could result in new debt.

A credit score is necessary to apply for a car loan, mortgage, or credit card. It’s also essentially necessary to lease an apartment. Car insurance rates skyrocket with a poor credit score.  A good credit score is a part of financial independence.

While credit card use is known to encourage overspending, it’s also one of the easiest ways to build a credit score without actually carrying debt (i.e., make small purchases and pay them off each month).

Marriages can end from death in addition to divorce, so each spouse needs to be ready for independent financial operations if the worst happens.

Debt Management

In my financial “perfect world,” people would view credit cards as “convenience cards.” They make spending, especially on large purchases, easy; they offer fraud protection, and they enable purchases quickly while moving cash between accounts for the purchase, which can take days or more.  But the science is settled—we spend more when we swipe plastic than when we hand over cash.

Credit card companies offer points, miles, and cash back because many users carry a balance each month. It’s the interest on credit card balances (and transaction fees) that pay for our credit card benefits (and the fancy bank skyscrapers too…)

If our kids are going to learn to use credit cards responsibly (buying only what they can already pay for with cash on hand, never carrying a balance, and buying only what they planned to buy) then it could be better to start the cycle while they’re still looking to us for guidance and guard rails.

Cleared to Rejoin

Despite seeing the harm credit card debt causes many families, I think I want my daughters to have a credit card. But what I really want is for them to be financially independent and ready for whatever life sends their way. Ideally, our kids have a banking account, an IRA, and even a brokerage account before they “need” a credit card, but all are part of future financial stability, whether flying solo or as a 2-ship.  How about you—a credit card for your kids? Why?

Fight’s On!

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