Should Your Teen Have a Credit Card?

Your teens might have part-time jobs, bank accounts and debit cards, but should they also have credit cards? One survey found that 54 percent of parents had added their teens as authorized users to their accounts; a second survey found that 18 percent of children ages eight to 14 had access to credit cards. In other words, your teens wouldn’t be the first to have credit cards in their wallets.

Before adding your teen as an authorized user to your credit card or co-signing to help them secure their own credit cards, ask these six questions.

1. What are the benefits of giving my teen a credit card?

In addition to serving as a spending tool, a credit card helps teach teens about financial responsibility and it can help them build their credit scores; both will put them on a path to long-term financial health.

2. How responsible is my teen?

If you have any qualms about whether your teen can handle the responsibility of a credit card, consider a secured credit card (it requires a deposit equal to the credit limit) so your teen doesn’t have carte blanche to charge everything from lattes to laptops.

3. Have we talked about responsible credit use?

Don’t allow your teens access to credit without having frank conversations about responsible credit use. Your teens need to understand that any charges they rack up need to be paid back and failing to repay balances can cause interest to accumulate while negatively impacting their credit score — and yours, too, if teens are authorized users.

4. Do my teens understand the rules?

Is it OK to charge pizza and movies or is allowable card use limited to rideshares and college textbooks? Your teen needs to know when it’s appropriate to use the card and what kinds of charges are prohibited. Even with rules in place, monitor their spending and go over credit card statements together to examine all of the charges your teen makes.

5. Who will pay the charges?

You don’t want to be surprised by the charges that appear on your credit card statement and your teen doesn’t want to be surprised with a bill. Outline who is responsible for covering the charges: Your teen might have to hand over earnings from a part-time job to cover new sneakers while you might pay the fee for a tow truck if the car breaks down.

6. Am I handling credit responsibly?

The average American household has $5,700 in credit card debt. If you’re struggling with credit card debt, adding a teen to your account could cause additional debt. Remember, adding your teen as an authorized user means you’ll be responsible for paying all of their charges. If your teen charges more than you can repay, you risk ruining your own credit score. Good credit and responsible card use should be a family affair.

Credit cards can be a great tool for teaching financial responsibility. Be sure that your teen is ready for the responsibility and can build a positive credit history while they are young. Need smart budgeting tools? Your Farm Bureau agent may be able to help – contact them today for advice on building and managing a budget and teaching your teens financial lessons early.