Should your teen have a credit card?

Your teen probably wants one, but is it in his/her interest to have a credit card? Answers differ. One approach holds that giving a teen a credit card is an opportunity to teach him/her responsibility. The other opinion is that trying to teach a teen financial responsibility by giving him/her a credit card is like trying to teach him/her about gun safety by giving him/her a loaded gun with no safety.

You might find that giving your teen a credit card has some benefits for you, such as he/she can do some errands, such as grocery shopping, without you. In addition, knowing your teen has access to an “emergency fund” might also give you some peace of mind. However, if you’re going to give your teen a credit card, you probably want to gauge your teen’s level of responsibility to decide whether it’s a good idea, not what is convenient for you. You can choose what type of credit card to give your teen based on your assessment of his/her maturity level. For example, giving your teen a card on your account means your teen now has access to the same level of credit that you do - - and it all goes on your credit report. As an alternative, you can get your teen a prepaid debit card, which limits how much he/she can spend. Another option, which provides a bit more flexibility, is a secured credit card. For a secured credit card, a certain amount of money must be deposited before the credit can be used; this is the security. If your teen has a job, he/she can use his/her money as the security.

Despite these options designed to introduce credit to teens slowly, financial expert Dave Ramsey is not a fan of giving credit cards to teens or even college students. He notes that fully one-fifth of all bankruptcies are filed by young people, proving that “easy” money combined with lack of impulse control and appreciation for consequences is a deadly combination [Source: Ramsey].

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