Preparing Your Teen for a Credit Card

How do you know when your teenager is mature enough to have possession of a credit card? Is there a magic age that makes him or her money smart?

Of course, sadly, there's no magic age. If there was, then perhaps so many adults wouldn't be head over heels in credit card debt. As most people know, credit cards can be dangerous if not handled properly. They can ruin a person's credit and end up costing hundreds or thousands of dollars in interest and fees.

That's why, as a parent, it is important to teach your teen how to manage a credit card. It's not a simple matter of handing it over and telling him the limit. How a teen handles the responsibility of a credit card depends on what and how he is taught.

Believe it or not, how you manage your own credit cards can be your best teaching tool. If you have used your cards wisely by being selective about what you purchase with them and watching your spending amount, chances are your teen will have noticed this. In fact, he may have heard you say, on more than one occasion that he can't have something because you can't afford it. If, on the other hand, you recklessly purchase items that you can't afford and then have trouble paying the card bill, you have set a bad example for your child.

A parent usually knows his child better than anyone else. A parent will know a child's spending habits and how responsible that child is. If the teen has been given an allowance throughout his childhood, you should have an idea of how he handles the money. If he runs out and spends every dime the day he receives it, chances are the credit card will be maxed out pretty fast. If, however, he actually has money left over when he receives his next allowances or has managed to save some of it, then he's already got some money smarts.

Some parents will begin a child's venture into the credit card world gradually. They may give him a card with a small limit or even a prepaid credit card. A prepaid card allows you to actual set the amount because you are paying for it upfront.

Parents should talk to their teens about how to use the card. Caution them about retaining the receipts. Do not throw them away or leave them when they pay. This will help prevent anyone else from getting their information as well as making it easier to check the monthly statement.

Once the monthly bill or statement comes in, the parents need to sit down and go over it with the teen. Be sure they understand the charges that may apply and verify the charges are correct. This will also allow the parent to see what the teen is actually using the card for.

Even after your child has had possession of the card for a while, it is still a good idea for parents to check the statements quite often. This will help keep you, the parent, informed as to how well the teen is handling the credit card. It may also help keep the teen's spending in line since he knows Mom or Dad will be checking the account.