My 13-year-old wants a credit card since her best friend has one. Seems young to me. Would you say yes or no?
Credit for Kids?
Dear Credit for Kids,
My first reaction is, no! However, it has some potential upside, so let’s vet this a little closer.
Far too many young people are learning how to be consumers and not producers. In other words, they become expert spenders but have not been taught how to generate income.
Setting that aside, this credit card idea has some possible benefits.
Giving your teen a credit card is an opportunity to teach responsibility and restraint. Ideally, no child should leave home without understanding Biblical stewardship. Knowing how to manage God’s property impacts one’s eternal destiny. If a credit card can reinforce that, welcome it.
Why Make Your Teen an Authorized User on Your Card
Authorized users are dependent on your credit history to build theirs. If you have good credit, it will show up on their credit report. Adding your teen to your card has the potential to:
- Build credit history
- Teach credit management
- Grant peace in the event of an emergency
- Offer convenience in running errands for you
- Allow you to monitor spending
- Make online giving accessible
- Add to your card rewards
Different cards have different age requirements for cardholders. There are starter cards for college students or those with no credit which can be opened in their own name if 18 or 19 years old. If younger, they can be added as authorized users on a parent’s card. Look for no-annual-fee cards, and be aware that some charge fees to add authorized users.
Making your teenager an authorized user on your account while teaching him/her wise use can build a positive credit history for him/her. Timely payments, low credit utilization, and the age of the card will be added to the teen’s history. Good credit will prevent the need for co-signing in the future, which the Bible warns against anyway. The Balance states the following reasons for teens to build credit:
- To rent an apartment or qualify for a mortgage
- To rent a car or buy one
- To qualify for favorable interest rates on loans
- To gain lower premiums for auto and homeowner insurance
- To qualify for a job, since some employers use credit scores to evaluate candidates
A teen who is mature and teachable will welcome the responsibility you give him/her. It demonstrates your trust, which will boost his/her self-confidence and the desire to handle a card wisely.
Before having a card, teens should have a checking account. Knowing how to write checks or make online payments, keeping their check register up to date, and balancing the checkbook monthly will help them understand the connection between cash and credit. Have them write the check or make online payments for their monthly spending.
Teach them how a credit card works, how it affects their credit score, and the financial consequences of not paying in full each month. Explain the dangers of losing one, not keeping track of spending, and exceeding limits. Give them a credit limit, and show them how to keep track of spending. Require them to cover specified charges. This will vary among families depending on the maturity level of the child. They must guard the number and never share it with friends. Check their credit score periodically, and celebrate their good work.
Have a plan in place should they overspend. Give them the opportunity to work for you, to pick up extra work somewhere, or to sell something of value. Bailing them out will only weaken their resolve to be responsible.
Credit card debt is a problem for many. If you struggle with it, please do not give your teen a card until you get your finances in order. Use your situation as a teaching tool for your teens. They may be the encouragement you need to systematically pay off your debt.
You are legally responsible for any authorized users. If the card is mishandled, your credit score and theirs can be negatively affected. Text message alerts for charges can be helpful.
If you prefer that they not have access to your account and its credit limit, then apply for a new card, and set a low credit limit for their use. Then, continue using your original card for your daily-use. Should they lose their card, it can be canceled immediately and replaced, without disturbing your primary card.
Training young people in the proper use of credit will prepare them to be wise stewards. For a list of recommended credit cards for teens, check out Credit Karma and Wallet Hub. For help teaching, see ThePennyHoarder.com, Credit cards 101, and How to Use a Credit Card.
Stress the importance of being a manager of all that God provides, and set before them the goal of hearing the words: “Well done, good and faithful servant.” Crown offers several courses that may be of benefit to you. Your Life: Financial Stewardship for Teens is one such course. You can find it as well as many others at www.crown.org.
Chuck Bentley is CEO of Crown Financial Ministries, a global Christian ministry, founded by the late Larry Burkett. He is the host of a daily radio broadcast, My MoneyLife, featured on more than 1,000 Christian Music and Talk stations in the U.S., and author of his most recent book, Seven Gray Swans: Trends that Threaten Our Financial Future. Be sure to follow Crown on Facebook.