Credit cards and teenagers can be a potentially dangerous thing when mixed together. This is because giving a teenage a credit card might allow them to think it is actual cash they get. They might also think there are no penalties down the road.
Yikes! To think this! Educating your children on credit cards, and how they work might be beneficial, but sometimes they do not listen.
Having a credit card can be great for college, or other financial duties that they might have but they should know that sometimes the interest on the cards is not worth it.
Paying it back might also become difficult, and they might end up ruining their credit instead of building it. This is something that is happening to a lot of teenagers. “Mom, can I get a credit card for college, and to build my credit score?” Mom says, “you have to be responsible with it, get a job, and pay it back when it is due.” The kid gets a card, spends the money on it on a lot of electronics and games and fun stuff then come time to pay does not have the money.
Their credit is ruined even before they hit 20. This is not true of all teenagers, but the ones who might think it is free money, it actually is not. Safe guard your credit score, it might be the only thing that helps you through the recession. You want to make sure you get the information and the facts prior to getting a credit card. Also, be sure to check your free credit score if you haven’t already, this will give you an idea of where you stand and what you can do to improve your credit score.
Remember that at this age, teens are influenced greatly by their peers and begin seeking independence from their parents. This could lead to the teen making some bad decisions with the credit card. This is where it is important that parents step in.
Some parents start their teens off with a prepaid credit card, just to get them used to the idea of using one. In these situations, the parent can act like the bank and collect the amount that was spent at the end of the month. By doing this, the parents are able to teach their teens about how they received their good credit.
Once parents are certain that the teen is able to handle the responsibility, they can start looking at actual credit cards.
Here are some tips for parents to keep their kids out of debt, and into the green:
1. Get only one credit card with a small limit. Then pay the monthly payments as they come.
2. Charge only one thing to the card, and pay it off before charging another thing to it.
3. Only purchase items that you know you can afford in the future using the credit card. This will ensure that you can cover what you purchased, pay off the credit card, and bump your credit up in the process.
4. If you’re in doubt about getting a credit card, then you shouldn’t. You should feel secure obtaining and using a credit card.
5. Remember that borrowing money from a credit card means you will have to pay the amount back with interest. You might be saying goodbye to some future paychecks.
“3. Only purchase items that you know you can afford in the future using the credit card. This will ensure that you can cover what you purchased, pay off the credit card, and bump your credit up in the process.”
This is how I got through college and ended up with an Excellent rating by age 21. That rating saved me from making utility deposits, got me a good rate on my first car since I didn’t have enough money yet to buy it outright, and got us a great interest rate on our house.
Credit is awesome as long as it isn’t abused. I personally think that if you ever feel like credit is free money, than it is not for you, but if you see it as one of many great personal finance tools, it works pretty well!
Bad idea I think, giving a teen a credit card. Unless you give them a secured credit card. That would be fine. I would be teaching kids that you don’t need credit cards. Best to not even go there.
The good thing about a CC for a teenager is frankly that you have moral hazard in full effect. If you can’t pay your $3,000 bill, yo mama gonna bail you out b/c she don’t want you to start life with bad credit! :)
Best,
Sam
@Financial Samurai, Great point. Your parents are the ones who let you get a credit card, so unless you have a small limit on your own card (which will happen if it’s a teenager), the bill will be the responsibility of the parents too, so they’ll ultimately be the ones paying.