No, building credit shouldn’t be a family affair.
But Apple thinks it should be, and next month the tech giant is introducing the “Apple Card Family.” According to the company announcement, this new feature is an “innovative new way for people to share their Apple Card, track purchases, manage spending, and build credit together with their Family Sharing group.”
Apple believes it’s doing families a favor by allowing them to make a group exercise out of using and managing debt, including enabling parents to share Apple Card spending privileges with children as young as 13. Here are some answers to questions you may have about this new feature.
• What’s new about the Apple Card Family?
Apple is touting the ability of Apple Card customers to form family groups — up to five people — that can manage the credit card spending from their iPhones. All users must be part of the same “Family Sharing” group and be 13 or older.
“We designed Apple Card Family because we saw an opportunity to reinvent how spouses, partners, and the people you trust most share credit cards and build credit together,” Jennifer Bailey, Apple’s vice president of Apple Pay, said in a statement. “Apple Card Family lets people build their credit history together equally.”
There already exists a credit-building strategy called “piggybacking,” which involves letting someone — a teenager, parent, or even friend — become an authorized user on your credit card. People with no credit or bad credit are sometimes advised that this is one way to establish or rebuild their credit. The authorized user benefits from the positive credit history of the primary cardholder.
With Apple Card Family, individuals 18 and older can opt into having the card’s usage reported to their credit reports. For those who opt into the reporting, all account activity — positive or negative payment history — is reported to credit bureaus. The credit history is not reported for children 13 to 17.
I typically discourage “piggybacking” because the downside is that the authorized user is not responsible for any of the charges. So, even if you set a low limit, you can still be on the hook for charges you didn’t make.
• Should I share my Apple Card with family members?
Apple says the Apple Card can be shared with any eligible customer who is 18 years or older. As co-owners, they have “transparency into each other’s spending” and “share the responsibility of making payments.”
Additionally, with the new feature, two existing Apple card customers can merge their accounts so that they have a higher credit limit. Apple also says the combined credit limit will have an annual percentage rate (APR) that will be the lower of the two original accounts.
Mixing money and credit with family, what could possibly go wrong?
By the way, the top two factors that help your credit history and thus your ability to obtain a good score are paying your bills on time and getting rid of debt.
• Should I help my teenagers build a credit history?
Apple touts the ability of a cardholder to share the card with anyone who is 13 or older as a “participant,” “so they can learn how to spend independently and responsibly.”
The company says parents can set up spending limits and “controls to help teach smart and safe financial habits.”
Your teenager doesn’t need to learn to use debt or build up a credit history at such an early age. Is your child going to need an auto loan, apply for a mortgage or rent an apartment before her 18th birthday?
You know what helps children become responsible money managers: teaching them to live within the financial limits of the cash they get from an allowance or part-time job. A debit card can teach them how to manage their money.
Here’s another way to teach your children how to spend well. Give them a set amount of cash — or load the money onto their debit card — and let them be responsible for buying groceries for a month. They will quickly learn about budgeting.
In my experience, the ideal time to introduce credit usage to a teenager or young adult is when they are about to graduate from college or will soon set out on their own. At that point, you can help them get a secured credit card, which is backed by money deposited into a savings account. For example, if the required deposit is $250, that becomes the person’s credit limit.
I helped my eldest child get a secured credit card. I told her to make only small-dollar purchases and to pay the entire balance off before the due date every month. After just three months of having charged just two items, her credit score was over 700. The next step was to have her apply for a regular credit card. She was approved and received a credit limit of $2,500. She’s only used that card a few times in the year she’s had it. Her most recent credit score was 773.
• So, is Apple Card Family a worthwhile feature?
“Apple Card is the first credit card designed for iPhone and to help people lead a healthier financial life,” the company says.
There’s nothing wrong with this feature, but it’s not extraordinary.
And here’s what leads to a healthier financial life: Using as little credit as possible and having a healthy hatred of debt.