Credit or debit: What鈥檚 best for a young teen?
Every Monday at about聽7:20 am, my household goes through a mad scramble to find $10 in cash. My 13-year-old son needs exactly $9.90 to聽buy聽his weekly train pass on the way to school. Sometimes,聽we all forget until he has left the house, and聽one of his parents聽has to chase聽him聽down the street in pajamas to give him money. He loves that.
Considering that I write about聽聽for a living, it took way too聽long to realize that there鈥檚 a simple solution to our problem: Get this kid some plastic.
But is a credit card or a debit card a better choice for a teen this young?
It鈥檚 not difficult to add kids as an authorized user on a parent鈥檚 credit card, but some families prefer to open a bank account with a debit card attached聽so the children are not walking around with a high credit limit in their聽pockets.
When cash is no longer the best solution for young teenagers鈥� regular expenses, the聽decision on whether to go with credit or debit will involve聽several factors: making things convenient, teaching them聽about financial tools, protecting financial information聽and building credit.
Convenience for parents and kids
There鈥檚 no universal聽age when it suddenly becomes appropriate to get your children a credit or debit card. It depends on the kids 鈥� how responsible they are and how often they need to buy things when a parent isn鈥檛 around. The decision is often forced upon families when it becomes聽inconvenient for the children not to have a card.
As kids get more independent, they more often need to pay for:
- Clothing, sports equipment or school supplies
- Meals at school, or on outings with friends
- Transportation to school or to after-school activities
- Emergency expenses when traveling without parents
All of these expenses can mean substantial amounts of cash are in play,聽whether the money comes from聽an allowance or a part-time job. It can become聽inconvenient or even unsafe for kids to deal only in cash.
Credit or debit?聽For the sake of convenience, either one is a viable replacement for cash.
Learning to use financial tools
Most financially literate adults use both credit cards and debit cards regularly. Somewhere along the way, we learn the difference: Debit cards spend money we already have, while credit cards borrow money that we鈥檒l need to pay back later.
Kids will need to learn that distinction, too. But paying with a card can make money seem very abstract: You聽don鈥檛 see your聽supply of money shrinking聽the way you do聽when you鈥檙e聽using up the聽cash in your wallet. Starting with a debit card, and showing聽kids聽how to keep track of how much is in the account, may be a better way to teach them聽how to manage money.
Credit or debit?聽A debit card can prepare a young person to use credit responsibly in the future.
Keeping financial information safe
Whether it鈥檚 a credit card or a debit card, kids need to learn聽how to safeguard their new card information. That means not leaving the card out where someone could steal it or copy the numbers. It also means聽聽and avoiding sites that haven鈥檛 taken proper security precautions.
But fraud can happen聽even when you take every precaution. And when it does, the聽consumer protections in place for credit cards are聽聽than those in place for debit cards. You have聽more time to report fraud on a credit card than a debit card, and your liability for fraudulent charges is more limited. Also important: With debit card fraud, it鈥檚 your money聽that disappears, at least聽until matters get straightened out. With credit card fraud, the money at stake belongs to card issuers and merchants.
If聽you do get your child a debit card, you might want to consider聽a reloadable prepaid card, and keep the balance relatively low. A聽traditional debit card linked to a bank account puts more money at risk. But fees tend to be higher with prepaid debit cards, and they鈥檙e not as versatile as debit cards linked to bank accounts.
Credit or debit?聽Credit cards are better when it comes to security.
Helping young people build a credit history
Building credit is difficult, but it鈥檚 a whole lot easier for young people who have been added to a parent鈥檚 credit card account as an authorized user. However, a 13-year-old doesn鈥檛 need a credit history just yet; there鈥檚聽聽to聽adding such a young teen聽to a parent鈥檚 credit card account. You鈥檒l have聽plenty of time to do that later on.
For older teenagers, though, this is聽a solid聽reason聽to choose a credit card instead of debit.聽With authorized user status, the primary account holder (usually a parent) will still be responsible for paying the credit card bill. The teens will receive their own card, linked to the parent鈥檚 account. This will help them begin to establish a positive credit history, and make it easier for them to get their own credit card later. But it will also give the parent a chance to watch the children鈥檚 spending and help them learn budgeting and restraint.
Credit or debit?聽Debit cards don鈥檛 report account activity to the credit bureaus, so they won鈥檛 help build credit. Only a credit card that reports to the bureaus will build credit history.
What鈥檚 the verdict?
I have two objectives when it comes to getting a credit or debit card for my middle schooler. First, I want to make our lives easier, so we don鈥檛 have to remember that聽$10 in cash every Monday. Either credit or debit would serve the purpose here.
Second, I want to teach him to use聽financial tools wisely. For this, I prefer to start him聽with a聽debit card. Once he learns how to聽responsibly handle money he can鈥檛 see or touch, then we can move on to a credit card.
But what鈥檚 the best option for聽your child? That depends on your reasons for getting a card for your kid. If, like me, you鈥檙e looking for convenience, either credit or debit works well. If your goals are more complicated, you鈥檒l need to聽make a choice 鈥� until the day when your child is ready to handle both.
Virginia C. McGuires is a staff writer at聽NerdWallet, a personal finance website. Email:聽virginia@. Twitter:聽.
This story originally appeared on .
