Give my kid a credit card? Are you crazy?

Young people can learn to be responsible money managers by using credit cards.

“Creating healthy money habits, including avoiding impulse purchases, can be a challenging concept for parents to instill in their children,” says Jinnifer Ortquist, Michigan State University Extension Educator.

A friend shared with me how she helped her son learn how to think before he spends. When he was 14 years old he was given a credit card. You might be thinking: “That’s a crazy idea!” But before he was able to use it, he had to read the fine print and explain to her how the card worked – fees, payments, interest charges and rewards. This gave him a tool to utilize his weekly allowance and taught him how to track his spending. It also helped him make decisions about spending. Recently she said her son wanted to stop at Taco Bell on his way home but chose to “not put it on his card.” This experience continues to help him understand and apply the pros and cons of credit, as well as make wise spending decisions and resist impulse purchases.

Not every adolescent should have their own credit card. But for parents who are confident and responsible with using credit cards it may be a viable option for them and also a tool to help teach their children how to use one. Under the Credit Card Act, unless a young person earns income that can be documented or he is 21 years old, he can’t get his own credit card. My friend chose to list her son as an ‘additional user’ on a card from a local credit union. It’s important to understand that the person who is listed as the account holder is ultimately the one who is responsible for paying the bill. It will also affect your credit score if payments are late or charges go beyond the credit limit.

There were some built-in ways that made it easy for her to monitor her son’s use of the credit card. The card had the option to set a transaction amount and then have a text or email sent to her, for example, each time a charge of $5.00 or more was made. She could also set an electronic notice to come if the balance reached a designated amount. The ability to check the card activity online also added to the ‘parental controls.’

Her son is now 18 and has successfully completed his first year at a university. He has secured his own credit card (without a co-signer needed) and chooses to use it only to purchase gas for his car. He feels more in control of his spending if he uses cash for the majority of his purchases. Good for him and kudos to his mother!

Michigan State University Extension advocates that understanding how to use a credit card is ultimately about how to manage money. No matter what your age, it pays to be smart when choosing and using a credit card. It’s important to read all correspondence sent to you by your credit card company. Contact your credit card company and ask them to explain anything in the notices that you do not understand. For information on navigating the credit card process, visit the Federal Reserve System’s Consumer Credit Card Guide.

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