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Helping Your Teen Deal with Credit

by Katriena Knights

It's a fact in American society--credit is a way of life. While some people have sworn off credit cards, the majority of us still depend on our plastic to pay for everything from everyday groceries to large, special purchases.

However, it's also a fact that the majority of Americans are drowning in credit card debt. How can you teach your teen to use credit responsibly, avoiding the pitfalls of too much debt on too much plastic, but making wise use of the benefits of a credit card?

Many credit card companies are now offering special cards aimed directly at teens. Unlike many of the marketing pushes at recent high school grads and college students of past years, these cards are set up specifically to help you teach your child how to handle a credit card responsibly.

One popular option for parents is a prepaid debit card for teens. Often referred to as an "allowance card," this option allows you to determine exactly how much money your teen will have access to. You fund the card with your child's allowance, money paid out for chores, birthday money, etc., and then your teen can use the card just like a credit card. They'll have to keep careful track of how much money remains on the card and budget their purchases to keep from going over their spending limits. These cards are generally aimed at the thirteen-and-up crowd, and come equipped with a variety of parental controls. There are also a number of educational tools available, both through the credit card companies and other, independent companies, to help you teach your child responsible financial management.

Examples of the pre-paid debit card include:

• Visa Buxx
• Allow Card by MasterCard
• Current Card by Discover

A step up in the responsibility department from the prepaid debit card is the student credit card. These typically are co-signed by a parent and have a very conservative spending limit--usually $500-1,000. Since by law your child can't have his or her own credit card until they're 18 years old, you're listed on the account as the responsible party.

Before progressing to a student card, your teen must have a checking account and know how to manage it. While this is often taught in school, it's an excellent idea to sit down with your teen and walk through the process with them. Perhaps start with the debit card, then use a month or two to establish responsible use of a checking account before moving on to a student card.

Credit cards aimed at teens have plenty of detractors. But before jumping onto the anti-credit bandwagon, consider the advantages.

• Your teens can build a credit history before going out on their own
• Your teens can learn to handle credit responsibly, under your tutelage
• The world is changing--plastic and other alternative payment methods are becoming more prevalent than old-fashioned cash

In the end, it's up to you and your child. Only you know if your teen is responsible and mature enough to handle a credit card. But, as with other facts of life, like drinking, drugs, driving, and relationships, it's better to send your child into adulthood with as much knowledge as possible. In the long run, education will pay off with a higher level of maturity and responsibility, and hopefully save your teen from the pitfalls of massive credit card debt.

Categories: Teens, Children,

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New FeatureRelated Articles: Good Credit Management Skills Are More Important Than Ever, Helping Teens Learn to Drive,

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