Question: Should I give my teen her own credit card?
Answer: Today’s families are always on the run. For convenience, some parents have their credit card company issue an extra card to their teen to cover expenses. Once your teen applies for college, she will begin to receive her own credit card offers in the mail.
When considering whether to allow your teen to have a credit card, ask yourself a few questions. How responsible are you with your own credit card? Do you pay off the balance each month? It would be hard to teach your teen something that you don’t adhere to yourself. How responsible is your teen with the money she receives currently? If she has difficulty managing the money she has, she is more likely to have difficulty with “plastic” money.
If you feel that your teen has good spending habits and you are able to show her how to be responsible with her card, you may consider allowing her to have one with a small limit. Be sure to lay down some ground rules, however, such as informing you when she uses it, only using it for pre-determined items, paying off the balance each month, etc. Be aware also that you will be required to co-sign for the card, thus making you responsible to the credit card company for the debt.
A better choice may be a debit card, since the money will come out of her checking account immediately, and, once the money is gone, she can’t spend any more. If you and your teen bank at the same institution and you are listed on her checking account, then you can simply transfer funds to her account in an emergency. It may be a little more cumbersome to handle it this way, but it will certainly pay off in the long run when she graduates with no credit card debt.
Rumbough, CPA, CFP is vice president of finance with the Baptist Foundation of South Carolina. For more information concerning the above article or other matters, contact her at 800-723-7242.