Five reasons to give your kid a credit card
The clich茅 of a teen maxing out his or her first credit card has been imprinted on our collective cultural memories thanks to television sitcoms. But giving your child a credit card might be a terrific way to improve their credit and prepare them for adult life.
A computer chip is seen on newly issued debit/credit card in this photo illustration taken September 28, 2015. Some rewards cards offer significant perks, like double cash back on grocery store purchases.
Mike Blake/Reuters
Credit cards offer flexibility, valuable rewards and better security than cash. But they can also get unwary users into a lot of trouble.
So聽when it comes聽time to give your kids聽access to a聽credit card, it鈥檚 important that聽you teach them聽how to use it responsibly. This can help聽them understand both聽the benefits聽and the dangers.
The age at which it鈥檚 best to give a child a card will depend on the聽child鈥檚 understanding of credit and also his or her maturity, says Nan Morrison, chief executive officer of the聽in New York.
A聽credit card in teenage hands doesn鈥檛聽necessarily have to be a bad thing 鈥� as long as you give your kids聽the knowledge and supervision they need to use credit wisely.
1. Providing financial training wheels
鈥淭he best way to prepare kids for things is to start to instill good habits when they鈥檙e young,鈥� Morrison says. That includes credit cards. Helping children learn to budget, manage credit and keep their spending within their means can give them the聽聽they need to become independent money managers.
2. Tracking spending with online tools
Credit card transactions are easier to track than cash, both for the parent and for the young shopper. Morrison recommends teaching kids to use the online tools offered by the credit card issuer, so they can see how their spending fits into different categories.
3. Building a credit history
Your children will eventually need to qualify for credit cards on their own. Adding them as authorized users on one of your credit card accounts can help them聽while they鈥檙e still in their teens, which can ease the way when it鈥檚 time for them to apply for their own cards.
4. Preparing for emergencies
When Frances Key Phillips, a writer in Weston, Connecticut, was preparing to send her daughter, Berry, to visit a friend in Colorado by herself, she wanted to make sure Berry had a credit card for emergencies. The card also came in handy again when Phillips took Berry on a mother-daughter trip to Europe.
鈥淚 got her a chip card in case we got separated,鈥� Phillips says, referring to the聽聽that are more prevalent in Europe than in the U.S.
5. Shopping online independently
鈥淭he reality is that we live in a world of electronic transactions,鈥� Morrison says. 鈥淪ooner rather than later, a young person is going to want and actually need access to a vehicle to make some kind of online payment.鈥�
Phillips, who hates to shop, couldn鈥檛 agree more. She now gives Berry, 16, and her younger sister Lilly, 14, a budget to buy their own clothes online. Both girls did their own back-to-school shopping online, after clearing their proposed purchases with their mom.
And how did they do? One of them bought three pairs of jeans, and the other聽bought five shirts. Fortunately, they do share clothes.
Virginia C. McGuire is a staff writer at NerdWallet, a personal finance website. Email:virginia@nerdwallet.com.