Over one-third of Canadians share a joint credit card with their partner, parent, or child, according to a recent survey conducted by RATESDOTCA. Among the parents who share their credit card with their children, 63% said that managing their children’s purchases is less difficult than it was two years ago.
Sharing a credit card with your child may be a beneficial learning experience, as less than half of Canadians (46%) think that children aged 18 should be independent and in charge of their own credit card, while 34% chose the age of 21, and 15% chose the age of 25. Respondent’s opinions may correlate with their own experiences and lessons regarding credit cards and credit products, as 94% of Canadians rate themselves poor when it comes to financial literacy.
However, many children are no longer solely learning financial habits from their parents. In Ontario, the Ministry of Education has started to implement financial literacy education in the curriculum for grades 4-12.
Teens and Credit Cards
Teaching your child responsible spending may start early with an allowance and then a savings account. This generally transitions into having a debit card, which is how some parents track their child’s spending. Eventually, when your teen starts having more independence, you may consider giving them a credit card.
Many online purchases, subscriptions, cellphone plans, and teen essentials, require the use of a credit card. Although, teaching your child responsible money management may be the most important reason to introduce your teen to credit.
Teenagers can’t get their own credit until they are the age of majority in the province or territory they live in. This varies across Canada.
The provinces where the age of majority is 18 years old:
- Alberta
- Manitoba
- Ontario
- Prince Edward Island
- Quebec
- Saskatchewan
The provinces and territories where the age of majority is 19 years old:
- British Columbia
- New Brunswick
- Newfoundland and Labrador
- Northwest Territories
- Nova Scotia
- Nunavut
- Yukon
However, teens can access a credit card by having an adult co-sign the account or by being added as an authorized user on an existing card. While the primary user (who is responsible for all purchases) must be the age of majority, many credit cards will allow authorized users to be under 18 years old. Age restrictions are different on every card.
Adding a Teen as an Authorized User
Before giving your teen access to your credit limit, know that you may be held responsible for any outstanding balances. Missed payments will also affect your credit score. As a joint borrower, you may face the consequences of your teen’s irresponsible spending. So, it is best to fully educate your teen before sharing your credit card.
Make sure your teen knows:
- Credit card fundamentals: Interest rates, billing cycles, and payment terms, should all be understood before your teen gets a credit card.
- Credit is not “free money”: Interest is accrued daily on the balance. This means using credit could end up costing you more money.
- Good credit is the goal: Generating a good credit history and credit score can help you rent an apartment, get a car loan, or with many major financial decisions in the future.
- Being an authorized user is a privilege: Your teen’s access to your credit card can be revoked as easily as it was implemented. Don’t jeopardize your credit score if you see the situation starting to take a turn.
Therefore, teaching your teen responsible spending habits before giving them access to your credit card is paramount.
Setting Boundaries as a Parent
As a parent, there are certain limits and boundaries you can impose on the credit card you share with your teen. Slowly introduce your teen to using a credit card by:
- Setting a low credit limit: Some credit cards allow the primary credit cardholder to set a different credit limit for each authorized user on the account. However, if this option is not available, consider lowering the overall credit limit on the shared card.
- Restricting purchases: Start with a phone bill or small recurring charge that is made on the card, paid monthly, and on time. Broaden the scope of what purchases can be made on the card when trust is earned.
- Reviewing monthly statements: Review statements with your teen to discuss interest payments (if any), the type of purchases made with credit, and if the purchases were planned and budgeted for.
- Setting a timeline: Many college students don’t have an income stream, meaning they don’t qualify for many credit cards. However, setting a timeline to transition your child to their own credit card is a good idea. This can be after graduation, starting their first career job, or another appropriate date.
Smart Habits for Your Teen
As for your teenager, practicing good financial habits may come with a few mishaps and lessons but, hopefully, the result will be a lifetime or positive money management. Your teen should start by:
- Budgeting: Savings goals can help you prepare to buy and pay for purchases made with credit. There are many apps that can help budget and you keep track of your spending.
- Being aware of every tap, swipe, or scan: Don’t shop without a plan, you may fall for impulse purchases. It is not worth gaining interest on a latte or mochaccino. So, if you don’t have the money for it don’t buy it.
- Disconnecting: Don’t connect or auto-fill your credit card on apps and websites. Filling in the online form manually can help you better perceive the scenario as a money transaction.
- Paying off your credit card in full: Pay off your credit card in full each month to avoid paying interest on the balance.
- Never missing a payment: Always pay at least the minimum payment on your credit card and pay your bills on time. Missing a payment can impact your credit score.
Credit Cards and the Web
Knowing where to use a credit card is as valuable as knowing how to use a credit card. Many credit cards can be beneficial when shopping online. Generally, credit cards come with some sort of purchase protection and advanced fraud or security features, while others have extended warranties and insurance coverages.
Never input your credit card information into an unsecured webpage, sites that look untrustworthy, or over public WIFI. There are many scams that mimic large charities and brands, and can be found through email, social media, and similar URLs.
Protecting your credit card information can save you from unauthorized transactions as well as identity theft.
Find a Credit Card That Suits You and Your Teen
Find a credit card that suits both you and your teen. Whether it is a simple credit card with a low credit limit or one with an added rewards feature, your teen can start to learn smart financial habits before it’s too late.
With RATESDOTCA, choosing the right credit card for you and your teen is easy. Compare the best credit cards in Canada in a few simple clicks.
