The thought of your teenager having their own credit card is a little disconcerting (to say the least). But what’s even more alarming? Your eighteen year-old suddenly having the right to sign up for a credit card, with zero skills in money management. In recent years, a large number of parents are choosing to give their teenagers their first credit cards while still under adult supervision, allowing the adolescents to increase their financial responsibility. Although this is a wonderful learning experience for many teens, there are still those that not quite ready for full reign. How do you know which category you child falls into? There are key factors that should be taken into consideration when evaluating their preparedness.
How Honest is Your Teen?
One of the most important traits when it comes to budgeting is honesty. It is vital to be truthful with yourself about your fiscal means, as well as any other people you share your finances with. Applying this to your child’s everyday life, how honest are they when it comes to borrowing your money? Does your teen ask for the correct amount when he needs to purchase a book for class? Or is he more likely to “need” twenty dollars more than the book actually costs? Has he ever returned home with extra items you did not give him permission to buy? It is of utmost importance that your child demonstrates he is truthful when it comes to expenses; a credit card will have a much higher limit than the cost of their schoolbook.
How Does Your Teen Manage Their Time?
On that same note, evaluate how your teen manages their time. Is he reliable in meeting deadlines and obligations? Observe how often he turns assignments in late, or fails to complete his household chores. Chances are if he does not have the responsibility required to meet these expectations, he will not do well with the accountability of credit.
Evaluate Your Teen’s Level of Financial Responsibility
Many parents don’t realize their children are already living within a budget, even without part-time jobs or credit cards. If you provide your children with an allowance, they have already had the opportunity to decide how they spend it. In fact, even if a child has never been given a weekly allowance, they still have had to learn to utilize your budget –whether it’s Christmas or back-to-school shopping. So, ask yourself how they have handled themselves financially in the past. Do they
Prepaid Cards Are a Good Starting Point
Fortunately there are many different options available for giving your teen their first credit card, allowing you to cater to their level of responsibility. If your observations have told you that your child has a hard time meeting his deadlines, the best solution may be a prepaid card. In this case he will be given a Visa or MasterCard which has been pre-loaded with a set amount of money. The card will provide your teen with an excellent transition into the world of credit, without the penalty of credit reporting or debt.
Look into Secured Credit Cards First
If you feel your child is ready, but are still a little hesitant about giving them complete control, you may want to look into a secured card. This requires you to pay a deposit at the bank in order for them to secure the balance on the card. Your child will not be allowed to go over the set limit, and therefore the beginnings of a good credit history can be established. Make sure to monitors your teen’s spending closely though because secured cards require you to cosign, and have the potential to negatively affect your credit too.
Unsecured Credit Cards Should Be Your Last Option
The third option, which provides your child with the most responsibility, is an unsecured card. In order to be worthy of this privilege, you should feel 100% confident about your teen’s reliability to stay within your set limits. It is wise to create strict consequences about what will happen if they fail to uphold their side of the bargain.
The purpose of providing your teen with a credit card at a young age is to assist them in learning how to use it properly. As such, it is crucial that you select banks which offer online access. This will enable you to track their purchases, and have discussions with them when irresponsible decisions are made. Stick to your guns and take the card away if your teen begins to abuse the privilege.
Carefully Consider Your Options
Providing your teen with a credit card is a beneficial experience with long lasting results, but it is crucial to evaluate how much responsibility your child is ready for. Take awhile to observe your teen’s decision-making and reliability, then carefully choose what type of credit card will be the best fit for them.
About the Author
Brandon Mercury is a writer for InGoodMeasure.net. He grew up on the beaches of the Deep South before moving to the mountain tops of Salt Lake City. He focuses his writing on home improvement and interior design topics. Brandon is an avid football and basketball fan. You can find Brandon on Google+
