Best Credit Card Options for Teenage Kids

Money Management Tips on Wise Use of Cards for Parents and Kids

Jul 9, 2009

Sooner or later kids are going to be exposed to credit cards. Parents who supervise their kids carefully can empower them to make the right choices when they leave home.

Before being let loose with a credit card obtained by a well-meaning parent, kids need to understand how the banking system works and have basic money management skills. Discussions should be held in advance with kids on subjects such as impulse spending and how to control it, interest accrued on late payments, the importance of building up a good credit history and how to budget.

Tips on How Kids can use Credit Cards Wisely

Make payments at least the minimum payment each month on time. Other cards can also be affected by late payments, i.e. if the child has more than one card and the payment is late on one of them, the credit card company concerned may raise the interest rates on all cards.

Pay more than the minimum payment required on the credit statement. Paying in full means avoiding interest charges, keeping one's account current and building up an excellent credit history. A suggestion that works well is to use a credit card as if it were a debit card. If the money is not in the bank account, don't spend it, in this way credit cards can be used for emergencies should they arise.

Avoid using a credit card for cash advances unless for emergencies, for example, if there is a car breakdown and the car shop will only take cash. Using a credit card for cash advances will incur charges as well as a higher interest rate.

Avoid situations where a group of kids will pay a credit card holder in cash for entertainment or food. The cash given will more than likely disappear on other things, and the kid concerned will be left with a large credit balance to pay off. Rather let everyone be responsible for his or her bill.

Tips for Parents of Kids with Credit Cards

Avoid bailing the teens out if they have run up excessive credit card debt. Learning from mistakes is the best lesson kids can get. While they are still young, making them to pay off every penny themselves by getting extra jobs will be a lesson they will never forget if they have made the mistake of over-spending.

A parent is the best judge of his or her child's sense of responsibility. If the child has been well taught from young regarding money matters and has proven to be trustworthy, then a parent can decide if it is time for a credit card. It is still a good idea, however, to monitor the teenager's spending and payments regularly.

What Credit Cards are Best for Kids?

A parent with a credit card can add his or her teenager as an authorized user
Credit cards for kids that are prepaid (debit cards)
Credit cards with a low limit ($100 - $200)
O percent interest credit cards
Credit cards with no annual fee
Cards with reasonable interest rates (shop around online to get cards with the best interest rate)
Credit cards that offer online account management

Credit cards can be a useful tool for kids. In the end, whether one is checking out an online prepaid card for a teenager or there seems to be a great new credit card deal on offer, always read the fine print and check out fees, withdrawal charges and any other terms and conditions.