Should You Give Your Kid a Credit Card?
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Perhaps your teen is getting to the point where carrying around cash isn’t so convenient any longer. Maybe she’s signing up online for a crafts class, but she needs a credit card to do so. Or perhaps your student is away at college, and you’d rather he not carry a wad of $20s to the bookstore to pay for $400 worth of textbooks.
Is it time to let your teen or college student get a credit card?
First, you should know that the federal government has made it much tougher—thankfully—for anyone under age 21 to get a credit card. The Credit Card Accountability Responsibility and Disclosure Act of 2009 (Credit CARD Act) requires that anyone below age 21 either be able to show enough annual income to pay off his or her entire credit line or have a cosigner, such as a parent or spouse. The idea is to make it harder for minors to jump without thinking into credit card debt.
However, if you’re hoping to give your child a credit card with training wheels, you do have some options.
Perhaps the best strategy is to add your child to your own credit card account as an authorized user. Your child gets his or her own card to use, but you can easily track what he or she is charging. It’s a great way to help your budding adult start practicing good credit and money management habits.
As long as you’re paying your balance responsibly, your child will start to build credit in his or her name. Also, if your child is acting irresponsibly—racking up pizza charges that look like he’s feeding his entire residence hall, for instance—you can easily remove him from your account.
Other options you might consider include:
Whatever method of plastic you choose, remember to talk clearly and often to your children about how to use it responsibly. Teach your kids how to regularly check their balance and compare it against their monthly budget or allowance. And show them how much extra they’ll pay in interest charges if they don’t pay off their account in full every month.
A credit card can make it easier to pay expenses and bills—but it should never be an excuse for your teen to spend mindlessly.
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