In the United States, people under the age of 18 cannot legally enter into any contracts without a
co-signer, but what about the increasing number of parents who are getting credit cards in their
children's names? Do minors really need access to credit cards?
It's really a decision that is unique to each family. The most common reasons parents may decide to
get a credit card in the name of their child include:
- For emergencies
- Letting the child (probably a teenager) do their own school shopping
- Purchasing lunch and other necessities while out with friends
- For traveling (perhaps the child visits family members regularly)
When you are deciding whether or not to get your child a credit card, you'll want to think about their
age and maturity level. An elementary school student has very limited knowledge of what money is and how
people get money. On the other hand, a teenager often has a better concept of how money is earned and
what it's used for, and could be taught appropriate use of a credit card.
Many parents like the idea of getting their teenager a credit card in order to start teaching them
about financial responsibility. If this is your goal, then obviously you don't want to hand the credit
card to your child and let them have at it! You'll need to spend some time discussing the reasons for the
child to have a credit card, set limits, and discuss how payments will be made with the card. Will your
teenager be responsible for paying back the charges made to the card? If so, be sure you and your child
discuss this as well.
Alternatives to Credit Cards
What parents may want to consider instead of an actual interest-bearing credit card is a debit card.
Setting your teenager up with a bank account with a debit card teaches them to spend money they actually
have, rather than spending money and paying for it later. It is up to you how the bank account itself is
funded, but some parents have set up "direct deposits" for their children's allowance- which the child
accesses using their debit card.
A "Charge Card" is another good option for the younger crowd. While they can be used to charge
purchases, you cannot carry a balance from month to month on the card and must make the payment in full
each month. This will teach your child responsibility for "charging"- provided you don't just pay it off
each month for them without some discussion or maybe requiring the teenager to use their part time job or
babysitting money to make the payments.
If you decide you want to get a credit card, charge card, or debit card for your own child, be sure
you look into the rules of such an account with the provider you want to go with. Some credit card
companies restrict the "additional cards" to people of a minimum age; while others allow anyone of any
age to be the secondary card holder. Same goes for charge cards. For debit card accounts, there are banks
that offer youth checking or savings accounts with debit cards that are specifically geared to the needs
of teenagers. That might be your best option for instilling financial responsibility in your
children.
How to Use Credit Cards, Charge Cards or Debit Cards to Teach Financial Responsibility to
Children
When getting a card issued in your child's name, it's important that you spend some time with the
child teaching them the basics. Don't take for granted that they will already have this knowledge. If the
goal is to use the cards for teaching financial responsibility, here are some things to consider:
- Teach your children not to lend their cards to friends for any reason
- Review bank statements together monthly and compare receipts with purchases made on the
statement
- Teach children to pay more than the minimum payment - and teach them why that's important!
- Discuss what a credit score is and how it affects people in life
