The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Information on this website may not be current. This website may contain links to other third-party websites. Such links are only for the convenience of the reader, user or browser; we do not recommend or endorse the contents of any third-party sites. Readers of this website should contact their attorney, accountant or credit counselor to obtain advice with respect to their particular situation. No reader, user, or browser of this site should act or not act on the basis of information on this site. Always seek personal legal, financial or credit advice for your relevant jurisdiction. Only your individual attorney or advisor can provide assurances that the information contained herein – and your interpretation of it – is applicable or appropriate to your particular situation. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, contributors, contributing firms, or their respective employers.
Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them. Compensation is not a factor in the substantive evaluation of any product.
Everyone from Dave Ramsey to your neighbor down the street has an opinion about whether teenagers should have credit cards.
But the fact is many already do. According to a TransUnion survey, 19% of teens have a credit card.
If you want to introduce your child to the world of credit while being mindful of its dangers, keep reading.
Thanks to the Credit CARD Act of 2009, getting a credit card at 18, 19, or 20 is no piece of cake. Anyone under 21 must have a cosigner over 21 or their own financial means (savings or income) to open a credit card. The cosigner agrees to repay the debt when the borrower can’t.
Earn rewards, transfer balances, and explore cards with the best terms for you.
There are three ways your teen can gain access to a credit card:
According to a Wisconsin School of Business study, people who learn how to use credit cards early in life are less likely to have “a serious default in the future” and more likely to have a high credit score.
With that said, here are four pros and cons to consider before choosing a card for your teen.
As an authorized user on your credit card — or the holder of their own card — your child will learn firsthand how credit works. Before they use the card, you can use your personal experience or a resource like The Jump$tart Coalition for Personal Financial Literacy to hammer home the concepts of APRs, fees, credit scores, and more.
Emphasize the fact that using a credit card is a form of borrowing by setting up your child with a debit card. Once they make their first payment from their checking account, they’ll understand that a credit card comes with a bill that needs to be repaid on time to avoid accruing interest.
Learning about credit also can teach them important financial lessons, such as how to spend wisely, how to budget money, and how to accumulate savings.
You might be concerned that your teen will rack up costs thanks to impulse purchases. In fact, nearly 1 in 5 teens between the ages of 12 and 17 think it’s smart to use a credit card to buy something they can’t afford, according to a Credit Sesame survey.
Even if your teen understands that paying with a credit card is a form of borrowing, they might abuse the card after making purchases. They might make only the minimum payment on the card, for example, not realizing that carrying a balance from month to month allows the debt to snowball.
To combat this problem, you could use a mobile app like CardValet for real-time tracking of your child’s purchases. You also could set payment reminders on your calendar and your child’s calendar to ensure they pay their balance at the end of each billing period.
Having a strong credit score and lengthy credit history serves consumers well. It allows you to qualify for lower interest rates on private student loans for college, for example.
One of the pros of exposing your child to the world of credit is that you help them build their credit. Ensure that your child’s payments will be reported to the major credit bureaus. Ask your card issuer about its reporting before adding your son or daughter as an authorized user or helping them apply for their own card.
As an authorized user on your credit card, your child could harm your credit if they use it irresponsibly. For example, if your teen makes purchases you can’t repay right away, you could become delinquent on your account.
One solution is to have an agreement with your teen to limit their use of the card to a specific amount each month. You also could forbid them from using it at all. That way, they can enjoy the credit boost without putting your credit at risk.
If your teen secures their own credit card, your credit won’t be at risk — but theirs will be. Ensure they don’t ruin their credit by staying on top of their purchases and checking in weekly to ensure they have a plan to make their monthly payments.
If your teen is driving, working, or paying for their necessities, a credit card might seem like a logical next step. It’s a practical and convenient financial tool for a young adult who’s gaining independence.
But just like you warn your child about other dangers, have a conversation about credit. Teach them how to avoid common pitfalls of using a credit card and how to review their credit report. The more knowledge you equip them with now, the less they’ll have to rely on you for financial help later.
If you’re concerned about your credit, you can check your three credit reports for free once a year. To track your credit more regularly, Credit.com’s free Credit Report Card is an easy-to-understand breakdown of your credit report information that uses letter grades—plus you get a free credit score updated each every 14 days.
You can also carry on the conversation on our social media platforms. Like and follow us on Facebook and leave us a tweet on Twitter.
April 9, 2024
Credit Cards
October 21, 2020
Credit Cards
August 3, 2020
Credit Cards