Should you give your kid a credit card? It's a controversial question hotly debated between differing camps of parental mindset. On one side - it's never too early to teach financial responsibility - and the dangers - of credit cards. On the other - handing kids the plastic teaches them entitlement rather than a responsibility - and watch out when they hit the mall.
Bluntly put: credit cards and kids are a dangerous mix for two reasons. Credit cards teach kids the "buy now, pay later" mentality - and that can prove addictive. Marketing campaigns aren't shy about targeting youth in the hopes that they’ll spend more and more. The combination of the two can be costly - and often leads to maxing out. While some parents (like mine) take the “live and learn” attitude, with credit, learning the hard way can be an unwelcome financial burden – a lesson that can take years to pay off and have real financial detriment.
But that's not to say it's safe to keep kids in the dark about credit. Because of these reasons, it's vital to walk your kids through their first years with credit until they’re ready to go out on their own. What they’re taught now could be what totally saves them later.
While the bank says that primary credit card holders must be the age of 18 before they can apply, there’s nothing stopping kids from piggy-backing off of their parents' plastic. Unsupervised, this is obviously dangerous, but if properly done, kids can learn lifelong money management skills that are sure to get them ahead. Want to learn more about basic money management? Click here.
The generally accepted age for a youth to begin carrying a card in their wallet is during high school - and that should be a debit card. The use of a debit card will help them to learn the essentials of how to manage the money they have. As a first step towards credit, parents may eventually want to help their child get overdraft protection.
For teens, a good starter card is a gas card, like the MBNA Smart Cash MasterCard credit card. While the card will likely be in the parent’s name, it gives the teenager an opportunity to experience credit without the risks posed by the mall. Although gas stations now have mini marts in them, they still aren’t as risky as regular cards because buying options are significantly limited.
PS: Get approved for the MBNA Smart Cash MasterCard credit card and we'll give you a free $75 gift card (and enter you to win free gas for a year!) - whether you let your teen fill up with it - or keep it all to yourself - is up to you!
Considering your child’s level of maturity, the generally accepted age for getting a first credit card is after high school graduation. Ideally, this first card should have a low interest rate and no annual fee. A great learning exercise is to compare cards together and see which one works best for their needs. Discuss rates and rewards - and be sure to go over that fine print.
Once you’ve walked them along for long enough (generally speaking, until they graduate from college or university at the age of 21 or 22), the time will come when your child becomes financially independent. Knowing you’ve taught them everything you can and provided a safety net when they needed it can make it less daunting to let them go. You should feel secure knowing that your child has successfully learned to manage their money well.