Credit Card For Teens

Teenagers, not often known for their conservative purchasing decisions, usually rack up too much credit card debt. But some parents still prefer to give them credit cards because they believe their youngster should learn the value of responsible handling of one's finances. Others however are wary of giving credit cards to their young ones for fear that they will accumulate too much debt.

There are a lot of banks that offer credit cards specially tailored to answer the needs of high schools kids and college students. Most of these cards are issued with the guarantee of a co-signer such as the parent or the guardian. So while the co-signer has the ultimate responsibility for paying the card fees, students will also learn that they can use their credit cards in building a good financial background even though they don't have work.

If you are interested in giving credit cards to your youngster, make sure you have checked out all your options. There are banks that charge exorbitant fees, with the explanation that this is needed because the applicant does not have any credit history.

Before you give a credit card to your teenagers then you should understand the risks involved in doing so. Remember that you have no control on your child's spending. Any reckless behavior of your kid would certainly lead to too much debt, which you will have to pay since you are the co-signer. The credit limit for your child should be the lowest possible, so you can make sure he or she uses it only for emergency purchases. It also encourages them to have a certain budget and work on it, and to always pay in a very timely manner.

If you are not confident with your child's purchasing habits, give an extra credit card issued by your credit card company to your child. This comes for free, and your credit card company would normally not charge you any costs for this extra card. This way your kid will be less tempted to make any unnecessary purchases, and it allows you to keep a close tab on their spending habits.

You can also give a pre-paid credit card to your kids if they are still too young to have one. With this card, your kids will have an easier time using it since when the card balance runs out, they would not be able to use it.

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Deciding When Your Teen Should Get a Credit Card

One Mom's Five Step Plan for Establishing Ground Rules with Teen Credit Cards

As a parent, for me to give my teen a credit card, the following would have to occur. As a teen is still under my roof and should not have the type of expenses one might need a credit card for (which is non-perishable items) - so the credit card would be for emergencies only, unless the teen is very, very financially fit.

Step One: Teens need to have an income

A teen should have a job with income, outside of their allowance. This puts them on a path to responsibility and if they have the credit card, they can pay it off - which is as it should be. No job, no credit.

Step Two: Teens need to have a savings account

If your teen has not learned the importance of saving, and accruing funds - they don't know what spending really means. Some kids really think that you just go to the bank to get money with a plastic card (and forget that the money was earned as is not from an umlimited fountain of wealth)

Step Three: Teens need to have a checking account

This will teach your teen yet another way money is exchanged, and help them with record keeping which is needed for staying financially fit. By using a check register to keep track of expenses, your teen will see where and when they spend.

Step Four: Teens need to have a debit card

If your teen is successfully using a checking account, it's time to introduce a debit card. Many of these are visa or mastercards as well, but you can have that option turned off the card. This will teach teens how easy it is to get cash from a machine, and how easy swiping your card for inconsequential items like a pop and burger can turn into a zero account balance.

If the debit card is tied to their checking account, the money is immediately removed. If you allow them the visa or mastercard check cashing debit card then they may have a delay. If your teen can't handle this form of credit without overdraft fees they are not ready for a credit card.

In all cases, a debit card tied to a checking or savings account should be sufficient for a teen even in an emergency situation. If your teen is travelling or away at college, you may consider them using a parent credit card for approved expenses which you discuss ahead of time, or allowing them to apply for their own line of credit.

Step Five: Teens should apply for their own line of credit

Eventually your teen will be a grown up, and unless you've taught your teen to be a cash only person, it's likely that establishing credit is not a bad idea. If they have shown responsibility in the preceeding steps and are holding down a job, then allowing your teen to apply for their own line of credit can be a good thing.

Be sure to help your teen decide what sort of card they need, and an American Express may be the best bet for a starter card as it teaches you to pay off in full each month.

If you've adhered to the above plan and taught your child all you can about budgeting and having enough money to cover your purchases, you can do no more as parent's eventually have to let control of their teen go so they can grow into adulthood where they will make their own financial decisions.

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