Are credit cards for teenagers a viable option?

teens can get a credit card if one parent co-signs the application. The effect is that the parent is held responsible for the payment, not the teen.

Though many parents regard credit card debt as a scourge, teenage credit cards, if used right, can go a long way in teaching teens how to manage money. Credit cards for teens also offer many conveniences to the teenagers like free credit cards for teens, but teenagers should primarily use credit cards to build a good credit history so that when they graduate and start earning, they should find it easy to qualify for a job, rent an apartment, get a mortgage loan, etc.

Normally, parents give their teen's prepaid credit cards or low-limit credit cards. Prepaid credit cards for teens allow parents to curb their teen's expenditure, as the cash has to be put up upfront. Low-limit credit cards on the other hand carry limits as low as $ 200 - $ 300 and limit the teenagers' credit exposure.

Dangers of teenage credit cards

Credit cards in the hands of teens can have dangerous consequences. Here are some facts that teens should know about credit card usage:

• If a teenager gets into debt, it may lead to depression, which in turn will affect his health and studies.
• There have been a few extreme cases where teenagers have committed suicide because they couldn't handle the credit card debt.
• Some teenagers use credit cards to live it up. Studies have shown that teens with credit card balances over $ 1000 smoke more and drink more.
• Teenager students with a bad credit history may face many embarrassments later in life as employers, landlords, and banks often review credit history before granting any facilities.
• Credit card debt is a vicious tightening noose, and many young adults have been forced to file for bankruptcy because they have overused their cards. And once you file for bankruptcy, then your credit ratings will get damaged and you'll find it nearly impossible to get further credit.
• A teenager should know that if he misses a credit card payment he would have to cough up increased interest payments, late fees, and also get reported to the credit agencies, which in turn will downgrade his credit rating.
• Campuses allow credit card companies to sell their credit cards because they receive commissions.

Advantages of using teenage credit cards

Credit cards are not bad if used correctly. They go a long way in getting a teen ready to face life by teaching him the practical aspects of financial planning.

It is advocated that prior to acquiring a credit card, teenagers should have their own checking account and know how to write checks and operate their accounts. They should write out the checks against their credit card monthly balance. They should also keep a record of their credit card expenditure and should only spend as much as they can afford to pay at the end of the month. It is small things like these that teaches them the difference between cash and credit and makes them financially mature as they grow.

Apart from training in financial management, credit cards also offer the convenience and advantage that plastic money has over physical cash.

Teenager credit cards and responsibility

Teenagers aren't born financial experts. Nor can they learn the art of financial management from credit companies, who are nothing but specialists in teaching the art of spending. Thus, it is the duty of parents to educate their teenage children about the use and misuse of credit cards. Here is how parents should do it.

Parents should educate their teenagers with the basics of financial planning and management. The parents should show examples of real-life credit card bankruptcies, and also show their kids their own credit card statements and how they cope with their debt. This will boost the teenager's financial IQ as he starts understanding the cash and credit cycle. Maybe parents can first start helping their teenagers in setting up their checking accounts and working with a debit card. Once the teenagers grasp the working of a debit card, parents can then evolve them on to credit cards.

Parents should set limits on their teenagers' credit cards. That will keep the teenager's credit card euphoria and response firmly in check.

Teenagers should be taught how to use a debt calculator so that they can figure out how much interest they are paying on their credit card use. Using a debt calculator will also help teenagers compare different cards and choose the one that charges lesser.

Credit cards usage is both good and bad. If a teenager gets it right and uses his credit card correctly it will go a long way in making him ready to face the financial hassles that are so common in adult life. Credit card for teens can thus be a valuable lesson in financial planning.