Your little baby is growing up. Now that she’s driving and started her first part-time job, is she ready to handle all of the privileges and risks associated with owning a credit card? Heck, is she even old enough? You may wonder when is the right time is for your teen to get his or her first credit card. That’s a tough question, and a lot depends on your teen’s personality, situation, and why she wants the credit card.
First, if your teen is under the age of 18, she won’t be able to get a credit card, at least not without your help. For this reason, it may be more useful to wait until she turns 18 before broaching the credit card question. In the meantime, you can go down to the bank together and open a checking and savings account in her name (you’ll need to sign off on this as her guardian). A checking account will allow her to use a debit card and is a great way for you to teach her about the value of saving and investing for the future. The best aspect of a debit card is that your child can’t spend more than what is in her checking account. This safety net disappears when she gets a credit card.
Even when your teen turns 18, she may find it hard to qualify for a credit card since she has no prior credit. She will have a better chance of qualifying for a card if she has a job and can show steady income. It can also help if she applies through a bank where she has her checking account. Many credit card companies offer starter credit cards targeted for students. They come with low balances, but that might be a good thing! If she doesn’t qualify for a credit card, she can apply for a “secured credit card,” though she’ll have to deposit money against the credit limit.
If your teen absolutely must have a credit card and is under the age of 18, you can add her as an authorized user to a credit card in your name. The biggest risk here is that you (not your child) are responsible for paying off the credit card balance, so you’ll need to decide how much you trust your kid.
Is She Responsible Enough?
When talking to your child about getting a credit card, you’ll need to decide if he or she is responsible enough to handle the temptations of credit. Some teens who are mature for their age can definitely understand that they need to use their card wisely, while others may see it as a ticket to indulge and begin a lifelong cycle of debt. The fact that the average household carrying credit card debt has $16,748 in debt demonstrates that many fully grown adults can’t handle credit cards!
Before you encourage or help your child get their first credit card, determine if a debit card might be a better starting step. Also, make sure your child fully understands how credit cards work and how debt leads to interest, which means throwing away money. (Here’s a great article on giving your children positive money messages.)
Lastly, if you’re wondering if there is any good reason that a teen should have a credit card, there is! If your teen can responsibly use her first credit card, she will start building a positive credit history early. This will make it much easier for her to qualify for student loans, car loans, and even a home loan with a low interest rate and no need for you to co-sign!
Want to learn more about how to raise financially savvy kids? Check out our family finance article archive.