Would You Give a Teen a Credit Card?

As more consumers are working to dig themselves out of credit card debt, credit card companies are refocusing their sites on new markets to which they can solicit credit card offers. The teen market is one of those places.

Teenagers may, in theory, seem like a huge risk when it comes to credit cards but there are some pros to letting a young adult learn the art of money management early in their life. It is more about the ability to handle the credit card that the teen is taught then it is about the perception teens can’t handle money. There are many responsible teens that could benefit from a credit card. Those who work hard after school and understand the value of the dollar can use a credit card for convenience but also to practice good money management tactics that would last a lifetime.

Here we’ll look at the upside of teens and credit cards:

Spending Control
When a teenager makes a purchase on a credit card, the activity is recorded and mailed home each month on the credit card statement. If a teen is sharing an account with a parent, the statement will show exactly how money is being spent. This opens the door for parents and kids to discuss the difference between needs and wants. Mom and dad can actually check where money is going, unlike with cash.

Good Experience
Teens will likely have to make many decisions when it comes to using their credit card. The experience of making transactions and having to pay off balances at the end of the month will teach kids that things are not free and there are consequences for spending on credit. It also teaches them to manage the money they earn to ensure they have enough to pay off their bill.

Convenience
Teenagers who have a credit card are better equipped to deal with and handle emergency situations, such as car problems when their parents are not around. Teens also don’t have to carry cash around when making a bigger purchase.

Here is a look at the downside of teens and credit cards:

Just Too Easy
Without the proper lessons in credit management, teens are likely to overspend with little thought the balance that will be due at the end of the month. Charges that add up over the month can be a huge surprise for a teen with little to no income and their parents who end up paying.

Poor Credit Young
When you are just starting out establishing a credit history and score, a few mistakes can cost you a lot in the future. Ruining your credit early can be a difficult thing to overcome and lead to further debt problems, making it impossible for you to get loans for college, personal loans, car financing, and even a job.

Unauthorized Usage
Teens who treat their credit cards like a novelty may be more inclined to lend it out to friends. They may also be more disorganized, risking the loss or theft of a credit card. Watching statements each month and keeping tabs on your car can help prevent fraudulent uses.

A teen and a credit card can go hand and hand, but not without an education first. Parents who allow a child to get or have access to a credit card are responsible for make sure their teen knows how credit works and that it is not free money. As a teen gets older, they will likely be barraged with credit card offers and without a good background in credit, they may be likely to make some pretty big credit mistakes that could certainly affect their future.

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This entry was posted on Thursday, June 4th, 2009 at 5:55 am and is filed under Choosing a Credit Card, Credit Card Advice, Credit Card Applications, Credit Card Debt. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.