teens & credit cardsThe more you know about teens and credit cards, the better for your teens and their future. What are the key things you need to say to your teen before they get a credit card?

The monthly loan reality
If you don’t pay the full balance every month you will be charged interest. Credit card interest is high, often edging up close to 20%. That means that a $25 dollar purchase will cost almost $30 if you don’t pay it on time the first month. Then that purchase will cost $36 the next month and increase every month until paid in full.

Building a credit score
If you pay your bills on time your credit score will be higher. That means that in the future you will get better interest rates on personal loans for a car or a house. If you have a crummy credit score you will pay more in interest on loans in your future.

Getting purchase protection
You are protected from fraudulent charges and the credit card company will work with you to resolve the problem and issue a new card quickly. With a debit card you are liable for fraudulent charges and have take the lead and be proactive dealing with the financial institution to resolve the issue.

Choosing a credit card for a teen
After having the credit card talk it’s up to you as a parent to determine when to give your teen a credit card and what type. The age of your teen will determine the type of card is available for them. The big question is about who is the owner of the card, you and the teen, or your teen alone.

Credit cards for teens 13-17
Parents have to be owners of the credit card, but can add teens as authorized users. This is similar to my experience with my teens. They could make purchases on my credit card account. Through using The No-Cash Allowance  they were responsible for paying me back for their purchases from their financial accounts. What ever system you use it is imperative that your teen pays the balance within the credit card grace period.

If you are concerned that your teen might overspend on your credit card account, here’s a great suggestion. Open a new account with your teen as an authorized user. Set a low limit on the card and let your teen be the sole user of the account. This makes it easy to see the teen’s charges and keep them responsible for their spending without overspending on your account.

Click for an informational article on teens & credit cards for ages 13-17.

Credit cards for teens 18 and older
For teens 18 and older there are a variety of cards available. These will be in the teen’s name and may require proof of income through employment or higher education loans. If you have given your teens credit card experience at home  they should be ready to be responsible with their spending.

Click for an informational article about teens & credit cards for ages 18 and older.

Take the time to do some research about teens and credit cards.Then have the credit card talk with your teen. Create a plan with them to give them hands-on experience. Knowing how to manage spending using a credit card is an essential life skill, one best learned at an early age.