It can be a great idea if the purpose is to teach your teen about money management, debt control, living within a budget and bill paying. It can also help them establish a credit rating. It is not such a great idea if you just want your teen to stop annoying you about money. This article will explore various aspects of teen credit cards.
A good place to begin learning about the features of various credit card alternatives for teens is the credit card chaser.
Can a teenager get a credit card in her own name?
If the teen who wants a credit card is under 18, she cannot legally get a credit card in her own name. However, she can be made an authorized user on her parents’ card. Some credit card companies allow parents to set a credit limit on the teen’s card that is lower than the limit on the main card.
What about a prepaid credit card?
The parents sign the teen up for the card, and make an initial deposit. This is not technically a credit card, since the spending limit is established by the amount deposited. However, the card can be in the name of the teen, and it will help to establish a credit rating.
My teen is an 18-year-old student. Can he get his own credit card?
Credit card companies consider college students good credit risks, even those without a credit history. They heavily promote cards to them, often making deals with colleges to allow them to set up on campuses. Under the new credit card law, students under 21 must demonstrate income before they can be issued a credit card.
What is the interest rate on student credit cards?
They range from about 11% to 22%. They can create a real problem for students already mired down with student loans. If the student uses the card as another means to borrow money, rather than as a convenience, things can quickly get out of hand. Because of the high interest rates, if the student only makes the minimum monthly payment, it can take years to pay off the balance.
What features should I look for?
That depends on how you intend to use the card. Many cards offer rewards, but they generally carry higher interest rates. Others may offer zero percent starter interest rates, which jump up to much higher rates after a period, usually six to nine months.
How should my teen use the card?
Plastic is a great convenience and almost a necessity today. Your teen should be taught from the outset to use the credit card responsibly. He should learn that using a credit card is just another way of paying cash. If he doesn’t have it, he shouldn’t spend it.
How can I monitor my teen’s use of the credit card?
If the teen is an authorized user on your card, or using a prepaid card, you can easily establish a credit limit that the teen cannot exceed. This should be set at an amount which allows the teen to use the card for necessities, but which prevents overspending.
My teen is a college student with his own credit card. How do I monitor that?
Hopefully, by this time, he has learned the dangers of over spending with a credit card. If he is under 21, he will still need you to co-sign on the card, unless he can prove he has sufficient income to pay the bill on his own. If you are a credit card co-signer, you can receive copies of the credit card statements and monitor his spending that way.
How do I teach my child proper spending habits?
Start young. Open a checking account for her as soon as possible. Put a small amount in the account and have her write her own checks. Teach her that checks are money, and when she uses up the balance, there is no more, so she has to make choices. Then get her a prepaid credit card and carry the lesson further. By the time she reaches college and is on her own, she will have learned the proper use of a credit card. Learn more about student credit cards at College Board.
What if my 13 year old wants a credit card?
Since you will be able to monitor his activity, this is probably a perfect time to start him on the road to learning about managing his money. Start with a prepaid card with a limit of say $50 and teach him to live within it. MS Money has a good site to help with this.
Compare options of online credit cards for students with our credit card chaser!
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