Anyone under the age of 18 is too young to get their own credit or debit account. But at what point might you want to make your kid an authorized user on your own cards?
Determining whether your child is mature enough to carry a card is a tough decision. The right time depends on your situation and your son or daughter’s degree of responsibility.
With that said, it’s not a bad idea to start early. Credit and debit cards provide your child with a chance to learn financial responsibility and the banking system. No matter what age they are, they need to be able to follow certain rules to avoid considerable debt.
Where should you start? By considering your card options.
Card Types to Choose From
Different types of cards have different age limitations. Some, like prepaid debit cards, are available to children as young as six years old. Most banks require a child to be at least 13 to open an account that is co-owned by a parent. Many credit card companies have no minimum age requirement to add your child to your plan.
When your kid is ready for a card, consider these options:
● Debit Card
A debit card allows your teen to have their own checking account co-owned by a parent. Your bank may refer to this type of account as a youth account or a student account.
● Credit Card
Adding your child as an authorized user to your account will provide them with a credit card and the same features and credit limit you have with your own card.
● Prepaid Debit Card
A prepaid card is used just like a debit card from your bank, but the available amount is preloaded onto the card. With this option, you could provide your child with a set amount to use each month, or simply add money as needed.
● Secured Credit Card
Similar to a prepaid card, a secured credit card requires a cash deposit equal to the credit limit of the card.
● Online Debit Card
Mobile-first banks blur the line between prepaid cards and regular debit cards with online debit cards. These cards have fewer fees than prepaid cards and the convenience of a regular checking account.
Pros and Cons of Different Cards
Different types of cards also have distinct advantages and disadvantages. Think through the following to decide which is right for your teen:
Credit Card Benefits
- Your child can start building a credit history and credit score for the future.
- All users receive fraud protection enforced by federal law.
Credit Card Drawbacks
- Irresponsible use could lead to significant debt.
- Your child’s actions can affect your credit score.
Debit Card Benefits
- A checking account is a basic requirement of many other financial products.
- Debit cards are co-owned by parents, allowing you to have access to your child’s spending habits.
- You can remotely add money to your child’s card in the event of an emergency.
Debit Card Drawbacks
- Most debit cards have less fraud protection than credit cards.
- Some merchants only accept credit cards.
- If safety measures aren’t taken, your child can overdraft a debit card, leading to debt and fees.
Whatever you decide, you need to talk through something with your child: the importance of financial responsibility.
Raising a Financially Responsible Teen
It’s often said that age is just a number. When you’re considering letting your child out into the world with a credit or debit card, responsibility is a much bigger factor than age.
Many parents choose to forego the regular piggy bank and instead put their child’s weekly or monthly allowance on plastic. If their kid loses the card, they can simply contact their bank for a new one — whereas lost cash is simply lost.
Whatever you decide, these tips can help your family avoid financial issues:
● Set Ground Rules
Whether your child earns money or you give them an allowance, you have an important role as a parent. Teach them to make good financial decisions.
Before your child begins using a credit or debit card, determine what it will be used for (like lunch money and emergencies or online purchases). It’s also a good idea to decide how your child will keep track of how much they spend. For instance, your child may keep a log like a traditional checking account, or download an app to check every day.
● Consider a Trial Period
If your child is younger than 13 or has a tendency to lose personal items, you probably don’t want to turn them loose right away. Cards can be replaced, but it’s still a pain.
You can begin by allowing your child to carry the card while shopping, then graduate to carrying it only after school. When your child becomes accustomed to being responsible with the card, you can allow them to carry it for regular use.
● Give Them Room To Make Mistakes
Learning financial responsibility is part of life. For many people, it takes a few mistakes to get the hang of it.
You can advise your child against making frivolous purchases, but when it comes down to spending their own money, let them make the final decision. When your child doesn’t have money for a more important purchase later in the month, they’ll learn to appreciate the value of money.
The age at which your child is old enough to carry plastic is ultimately when you’re comfortable with giving them the responsibility. However, holding your kids back can leave them ill-prepared to handle finances as an adult. Give them a chance, and remember: You can always take it away.