Should You Give Your Teen a Credit Card?

Many teens think they NEED a credit card. In some circumstances it is a good idea to give your child a credit card when it can be an easier way to give them some money, allow you to monitor their spending, and teach them the responsibility associated with the credit card! Remember, with a credit card comes great responsibility so before even considering the idea you need to make sure your teen has the following understanding:

Before simply giving your teen their first credit card here are a number of tips:

• Knowledge is Power: Teach your teen what a credit card is and how it works.  This may sound like something they already know but understanding that credit works as a loan and there are penalties for not paying the bills may help them realize that it is not free money.  Explain that each purchase made must be paid back or extra interest will be added to the original amount.  Knowing how it works and the implications of not paying will help them understand the true responsibility behind owning a credit card.
• Budget: If you think your child is responsible enough to use a credit card, you need to teach him or her how to have the funds for the credit cards.  Make a budget with your teen and show them how to allocate funds for bills. 
• When is the right time: The younger the teen the less likely they will understand the power your give them with the card. I recommend not giving a credit card until he or she turns 18. A good rule of thumb for the right age to give the child a credit card is if they can’t work they shouldn’t have a credit card.  If you do decide to give them a credit card before they have a source of income explains to them that it is to be used with their permission only or in an emergency.  Make sure that the consequences for breaking that rule are clear.
• Other options: Consider giving your teen a prepaid debit card or have your teen open a bank account.  This will help them learn to budget money coming in and out regardless of where the incoming funds are coming from.  They will understand saving and what it means to have to pay for your purchases.  This way you eliminate the concern for late payments and interest and resulting ruined credit, and they will still learn how to responsibly spend (maybe even better because it is their own money).  This will help them learn responsibility and give them the responsibility to manage his or her own money without having to worry about them over drafting his/her account or accruing interest. 
• Dos and Don’ts of first credit card: If you must get a credit card, try and pay more than the minimum payment.  Be conscious of the balance of your credit card and try to keep it down to an amount that is easy to pay off the entire balance each month. 
• Credit habits: Credit cards are a way to work on your credit, but credit card habit can be addicting so consider teaching your teen and college student the importance of being able to pay for what you purchase.  Be careful and make sure the consequences are clear.

If you do decide to ahead and sign your teen up, make sure you monitor their spending at first to make sure they are being responsible with the card and not getting themselves into debt!