Teaching Your Teen Credit Card Responsibility

The role you play as a parent is diverse and challenging. Among myriad lessons a parent must teach a child is that of fiscal responsibility. In our modern age where cash is a rarity, fiscal responsibility must include how to responsibly manage a credit card. If you feel your child is responsible enough to begin learning about credit cards, the following tips can help you make decisions that will support them.

The first option, with the most safety and least risk is to consider a prepaid credit card. This card works much like a debit card for your teen-aged child. With this card, you child can begin to learn to budget and spend responsibility, but they will not be able to incur any debt. With a prepaid credit card, you (or preferably your child and you) make an initial deposit on a card. This deposit becomes the limit, and when your child spends, that amount is depleted until it reaches $0. You or your child can reload the card when appropriate. The balance on the card will not earn interest, but their will be no debt to collect interest either.

An alternative to having a prepaid card that still offer parental control is to open a secured credit card. With this approach, you (or preferably your child) opens an account with an initial deposit. The amount of the deposit becomes the initial credit limit. This allows the child to learn how to spend responsibly, make payments on time, and respect a credit limit without a substantial risk. A reasonable initial deposit of $200 - $300 dollars will give your child spending freedom, and an important safety net. A benefit of this approach is that the initial balance typically earns interest while the card is secured.

If you feel that your teenage child is more responsible, consider requesting a credit card for your child on an account that you already have. This will allow your child to begin building a credit history without giving them the full freedom of their own card. The credit card will still be under your account, and it will be your responsibility. You will be able to manage and restrict how much they can spend, and how frequently they can use the card.

Another approach for a child's first credit card would be to open a new account that lists you as the primary borrower and your child as a co-signer. This will ensure that the bills will come to you, and you will be able to closely monitor the spending and payments. If a payment is skipped, or if the spending goes beyond the credit card's limit, you, as the primary borrower, are notified.

Which ever card program you choose, make sure you you set clear guidelines for credit use such as your pre-approval of all purchases, requiring that balances are paid off monthly, and that you sit down and review credit card statements with your child on a monthly basis.

Being the parent of a teenager can come with many difficulties. On of these unique challenges is helping them learn to use credit cards and manage credit responsibly. If you feel your child is ready, consider getting them a credit card. Be sure that the credit card program you choose is appropriate to your child's fiscal responsibility.