Should You Let Your Teen Have a Credit Card?

Our world has turned so far that many of today's children will only have a passing acquaintance with paper money. Instead, plastic is the preferred way to pay, and your kids are likely to see you swiping a card, rather than getting out cash. As a result of the shifting trends in payment, it is important that your teenager learn how to responsibly handle transactions using plastic money. But is giving your teenager a credit card the right way to go about it?

Consider Starting with a Debit Card

Maybe, instead of using a credit card, you can help your teen learn valuable financial lessons about paying with plastic with a debit card. A debit card is not a loan, and it's something you can monitor closely. Many financial institutions will let you open a joint account with your teenager, and you can usually get a debit card for your teen if he or she is a certain age. There are a number of safeguards you can use to make sure your teen is on the right track with his or her budget and debit card use:

• You receive a copy of the account statement so that you can keep tabs on your teen's spending and address problems.
• You can add money to the account easily when you pay an allowance or pay for jobs around the house.
• It's possible to ensure that when your teen has insufficient funds, the transaction is declined, rather than being allowed to result in an overdraft.
• Some banks will send you alerts related to account activity.

All of this can allow you to monitor your teen, and encourage him or her to track spending and stick to a budget. You don't want to enable a child's poor financial behaviors, and you want to provide guidance. Starting with a debit card can help you do that, and it can ease your teen into the world of paying with plastic, encouraging him or her to develop good habits.

Deciding Your Teen is Ready for a Credit Card

You might decide that your teenager is, in fact, ready for a credit card. You will have to let him or her have a card on your account for now. This means that you will be able to monitor your teen's credit card use fairly closely. Make sure that you keep track of what is happening, and encourage your child to pay off the balance.

Before you give your child a credit card, though, make sure you know he or she is ready for the responsibility. If he or she shows a willingness to stick to a budget, and is responsible in areas of school, work and extracurriculars, these can be indications that he or she is ready for a credit card. How he or she handles the debit card can be a good indication of what to expect with a credit card.

Make it clear, though, that a credit card is privilege that can be revoked. If your teen does not show prudence and restraint with the credit card, make sure you take it away. That would be a valuable lesson itself.

Image source: sxc.hu via Wikimedia Commons

This post was included in A Homeschooling Carnival at the Garden of Learning.