Should Teens Carry a Credit Card?

It can be daunting for any parent to give new responsibilities to their children, whether it is  their own car, full access to the internet or cable, or trusting them while they are out with friends. Similarly, giving your teen the responsibility of a credit card is a decision that requires careful consideration.

Are Credit Cards a Good Idea for Teens?

There are many parents who think handing a credit card to their child is not a good option. Many others think it is a great way to teach their children about the responsibility of handling money. While many people have their own views on the question. If you're wondering if teenagers should have a credit card this article helps you understand the benefits and downfalls of your teen carrying a credit card.

The Benefits of Teens Having Their Own Credit Cards

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  While obtaining a credit card is a big responsibility, it is also a really good way to introduce your children to the practice of handling money.
• Teenagers can learn from carrying credit cards. They can learn about credit scores, paying bills on time, staying out of debt and much more.
• It can teach your child that credit cards can be a helpful tool if used properly and responsibly.
• Another good reason for giving your teenage kid a credit card is to help them start a credit  history. Establishing a credit history is very useful for your child’s future as it can help your child rent apartments, secure auto loans, etc.
• You don’t have to ask for money or carry cash if you have a credit card. It also helps teens during emergencies like car issues, medical emergencies, etc.
• It is a great way to see what your child is spending money on. Parents can look at the credit card statement each month to see where the money is going. Knowing their parents are overseeing their expenses also discourages teens from spend money on things that are prohibited by the parents.

The Downfalls of Teens Having Their Own Credit Cards

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  Some teens may be irresponsible and reckless with their spending. They can cause serious damage to their future credit score. They can forget to pay their monthly bills or max out their credit limits.
• Some teenagers are impulsive buyers. Sometimes if they have access to a credit card, they might not think twice about spending money on something they need which can really rack up debt.
• Many teenagers have their parents as joint credit card holders. With irresponsible buying on the teenager’s part, the parents can get into more debt than they would want to.
• Parents may not know what or how much their kid has spent until after they get the monthly credit card statements. By then, it will be too late to do anything about all the expenses.
• Some teens might not feel like they are spending “real” money while using a credit card. For those teens, cash may be a better option.
• Many teenagers are jobless or working part-time on a low income. It could be easy for them to get buried under a lot of debt if they are not responsible with their credit cards.

Next Steps If  You Choose To Give Your Teen a Credit Card

Giving  a credit card to a teenager is a great responsibility. Therefore, it is best to give them a credit card once they have fully grasped the concept of managing money. 

A few things you can do to prepare your teen for owning a credit card:

1. Open a savings or checking account for them first to see how well they handle their savings and expenses and then decide whether they’re ready for a credit card or not.
2. See how your teen does with having a debit card. Are they using the debit card responsibly? Do they know how much money is in their checking account? Are they budgeting? Are they spending within their limits?
3. Have your teen open a savings secured credit card to start.  The credit card is actually secured by their savings account. So for example, your child has $500 in a savings account. A credit card with a $500 limit is given to your teen. The $500 in the savings account is "frozen" to cover the limit on the card. Your teen can then use the card to start building credit and making payments. If for some reason, the payments can't be made, the money in the savings account would be used to pay off the balance. 
4. If you are comfortable, add your teen to one of your credit cards as an authorized user or joint owner. However, it is important to remember that at the end of the day, you are responsible for the charges on the card. You could talk with your child and restrict the card for only items like gas or school related expenses by using a card control app. 

Help Your Teen Learn to Use a Credit Card Responsibly at First Alliance Credit Union

At the end of the day, it is a conversation between your and your teen about whether or not give them a credit card. There are most certainly advantages and disadvantages to allowing your teen to have a credit card. An honest conversation and setting expectations is a step in the right direction, and don't hesitate to take the card back if they are abusing their new privilege.  

First Alliance Credit Union offers three low-interest rate credit cards options that you can control access to using the My Cards tool in our free mobile banking app. Helping your teen learn financial responsibility has never been easier. 

Questions about credit cards for teens? Ask us!