Categories: Financial Planning, General Tips
Are they ready for a credit card?
How do you know when it is the right time to help your teen open a credit card? What are the options to consider before making this decision? What are the pros and cons for a teen to have their first credit card? These are all great questions to help decide whether the time is right for your teen to open a credit card account.
There are a few signs that may show that your teen is ready for their first card. One sign is if they talk about money, understand its value and participate in financial decisions with family members. For example, you may notice that they are saving their allowance for a special purchase, or that they’re weighing whether an item or activity is “worth” its cost. Another sign of readiness may be if your teen is able to manage their money, time and responsibilities on their own. This can include taking on a part-time job, making smart decisions about what they spend their own personal money on and how they are able to handle assignments and schoolwork deadlines.
Talk to your teen about what it means to have a credit card
One key part of this decision is what your teen has to say about opening a credit card. Have a conversation about what it means to have a credit card, and talk through the process of opening, using and paying off the card. Ask that they come up with pros and cons of having their own card. You can also ask your teen to participate in researching their card options so they can begin to learn about comparing terms, rates and benefits of various cards. This will help to set the foundation for learning how it “works” to use and manage a credit card.
Consider what features are important to you
Before you make the decision, consider the options and features that are most important for your family. What credit limit are you comfortable with? What purchases will you and your teen agree that the card can be used for? Who will pay off the balance each month? What will you do together if the card is misused? Having answers to these questions can set expectations for you and your teen as they begin this new responsibility.
As your teen approaches 18 and heads off to college or work experience, a number of strategies become available for beginning to build credit, saving for future expenses and working toward financial independence. Consider options like youth checking and savings accounts, budget apps and student credit cards to help them get off to a healthy financial beginning.
Many parents and teens recognize the benefits of opening a credit card to start building credit toward future financial success. If you think your teen is ready for a credit card, check in with The Summit’s Virtual Branch to learn about options and talk through how to make this new financial stage a success.