Teen Credit Cards: What’s Your Take?

Just hearing the words “teen credit cards” creates a visceral reaction in many people, one way or the other. It sparks debate faster than the classic question of whether or not to pay kids an allowance. I have a strong opinion on the subject (imagine that), and I’ll share it with you below. But I’m really interested to get your take on the issue of credit cards for teens.

Should You Give Your Teenager a Credit Card?

My short answer is no. I do not think teens should have a credit card, but not because they cannot be trusted, or because it encourages the use of plastic. I don’t think anyone should have a credit card if they do not have the means to pay it back themselves. Now if I could be convinced that my kids earned a steady income of $300 a month at their part time job and their limit would never increase beyond $300, then theoretically they would not accumulate debt. We all know that is not the way it works.

Credit cards companies give thousands of dollars in available credit to college students every day, even those with no income and no ability to repay. I know because I signed up for one my freshman year in school, and the first thing I charged was a Sony PlayStation video game system. After all, I could pay it back over the next couple months thanks to my part time job.

Over those next couple months I had two small emergencies that wiped out my part time earnings, and a third that I had to charge on the new credit card. So began the minimum payment game I would play for years to come.

Proponents of teen credit cards point out that allowing kids to have a credit card will help them learn to use credit responsibly as an adult. Good thing those same people don’t feel the same way about alcohol.

No, there are some things that young teenagers should not have to contend with, and one of those is the pull of available credit. Using cash hurts, and the lack of transactional pain missing when spending with a credit card will warp their spending habits. In fact, it has been shown to warp even adult’s spending habits – you just simply tend to spend more with plastic than with cash.

But It Will Help Their Credit History!

Maybe, but there will be opportunities to prove a history of creditworthiness later when they are finished with school, have their own jobs and are ready to buy a home. I tend to believe credit scores are overrated. Sure, some employers are now using them to screen employees, and other companies are using them to set rates for insurance, etc, but for the most part there is little incentive for a teenager to have an 800 FICO score. What can they do with it besides get into more debt?

As the Readers: What do you think about credit cards for teenagers? Bad idea, or good introduction to credit? Feel free to agree or disagree in the comments below.

Comments

  1. I agree that a credit card should be given only when the teen has proven responsible — and able to pay off his or her own expenses. One way my parents helped me build my credit — without a credit card — was by cosigning on a car loan. I made the small payments, and built a credit history.

  2. I don’t like credit cards for many reasons. One of which is that they make it entirely too easy to spend away future earnings. That’s not a good thing, because you just never know what you’re really going to need to do with that money.

    Giving a teen a credit card is probably a very stupid thing to do. Yes, there are some teens who will be very responsible with it. But there are others who will go wild and destroy their credit with it.

    That being said, I think that any law which prohibits an 18 year old from doing something that any other adult can legally do is just plain wrong. They are legal adults, and are expected to uphold the law as adults. They are allowed to go to war and get themselves killed, but they are treated like children. It makes no sense.

    If a person is going to get a credit card and destroy their credit by charging more than they can afford to pay back, it’s a lesson they need to learn for themselves. Going through the difficulty of bad credit can teach a person more in the long run than keeping the record clean from the get go.

  3. how will your children be able to buy a house with no credit history? I am a responsible credit card holder. I pay the balance off every month, but use it for convenience and to keep a line of credit open. I see no problem putting my teenagers name on my card to help them build credit history. They will never possess or use the card, but I will be helping them be able to buy that house one day.

  4. I’m a strong proponent of individual freedoms, and turning 18 grants you the right to do just about everything other than drink.

    But credit cards are one of those things that I’m very conservative about, and the new legislation that’s pushing for a 21-and-over law as well as co-signers under that age may not be such a bad thing.

    College students are out to make a statement and declare their independence. Unfortunately, most of us also did it by spending money we thought we could pay off in the future.

    We can’t trust the credit card companies to take care of this themselves – they know that parents will bail out their kids and pay off balances most of the time, so they give us huge limits.

    Unless restrictions are put into place, or parents really teach their kids about good money management, or college students stop being college students, the cycle will go on.

  5. I got my first credit card at 16, with the understanding that this card was for gas only and must be paid off each month. I believe the card and job came at the same time – once I had a job, I got a $500 limit credit card.

    When I graduated high school, my dad explained his system of tracking his credit card expenses to make sure I could pay it off each month. I did the same thing, and started using the card for convenience.

    When I graduated college, I had 7 years of solid credit history behind me and a score over 750. I got married, bought a house, and thanked my dad for getting me my first credit card! Our insurance rates are also very low, thanks to our good credit rating.

    Parents, if your kids aren’t responsible enough for credit or tend to rebel against authority, don’t get them a credit card. But don’t be afraid to trust a teen with a small limit credit card – credit is a fact of life now, and you may be setting them up for a bright future if they understand how to use a credit card responsibly NOW. Most adults still haven’t mastered this concept.

  6. Willing giving your under-18 kids a credit card actually makes me want to vomit.

    That being said it’s a free country (i think still) and I believe this should be up to the individual parents.

    Once someone is 18, they are a legal adult. They can take a bullet in the face for this country, they should be able to make their own stupid mistakes.

    I like you, Jason, don’t like the idea of embracing a system that rewards spending, especially that relies on spending money that doesn’t exist yet!

  7. Budgeting is an issue that my wife and I have recently had to…discuss…with our girls – both of whom are at the end of high school/headed off to college. Like the issue of cell phones for the both of them, their current credit card privileges are up for review and/or suspension at any time and so long as we pay the bill, we have the control. It was a heated discussion, but once we had the conversation about the cell phones about 2 years ago, the one about the credit cards was much easier!

  8. I have to admit that I’m one of those horror stories that we are all afraid of (including myself!). My dad tried to show me some things with credit, putting me on his credit card even. The problem was that my dad had great credit, and therefore a huge credit limit, which I took advantage of.

    I’m still paying off debt. Thankfully, it’s not the debt that I put on my dad’s card anymore, but that was a train wreck I won’t be repeating with my kids.

  9. What do I think about credit cards for teenagers? I don’t think about it. The majority of adults abuse them and many are addicted to credit. Why encourage such behavior at an earlier age. Even for those who don’t carry a balance, credit cards encourage spending. None of my children had a credit card as a teenager and only one has one as an adult. They paid cash for their cars. They don’t worship at the altar of FICO. Imagine that?

  10. My kiddo is still far too young for me to have to worry about this yet, but I’m very opposed to giving a teen a credit or debit card. At that age, they need to learn to budget and juggle finances with a more tangible form of currency.

    Credit cards were nothing but trouble for me even well into my late 20s. I do use them now, but never, ever carry a balance from one month into the next. I use ‘em for the cashback rewards dividends.

  11. I think it depends on the child. Like with any temptation, some will be able to handle it and benefit, and some will spend willy-nilly. My parents made me an authorized user at 15, when I could legally drive alone to work and school. I used the card for gas and occasional pre-approved purchases.

    I think one big factor that is being overlooked is safety. I traveled often, with my family, friend’s families and alone, as a teenager. Having a credit card, especially on road trips where a tire can blow out at any time could be an important part of a safety plan. Most teenagers don’t have the same sort of cash emergency fund as adults with full-time employment do to handle large emergencies away from home.

  12. When I was in college I worked part-time, but still really didn’t have much extra money. My earnings went toward food and necessities, since my parents had two kids in college and not a lot of extra money to send me. Even then it was too easy for a college student to get a credit card or department store card, and unfortunately that was the way I closed the gap between what I earned and what I wanted. What I didn’t realize was that the payments on the card were making it ever harder for my part-time wages to cover my needs.

    Over the years I’ve thought about the burden of those credit card payments in my college years and beyond, and really would prefer for my kids to be free of that. I think that, at least for my family, I’d prefer to teach first about living within your means, saving for what you want, and delaying gratification until you can afford it. When they have mastered those skills, then they can consider credit if they want it. Since my children want to be actors (!) they may not have the kind of steady income they will need for credit card payments anyway!!!

  13. The problem with the question is that it is not a black and white issue. You can’t say that credit cards are bad for ALL kids, just like they aren’t for ALL adults. I use a credit card that gets cash back and I pay off my balance every month. Like Squeaky’s parents, I have my kids on my card: they each have one. They use them for meals if they are out with friends, when they were in school for field trips, all that stuff. I authorize every purchase they make, we track it AND we PAY IT OFF every month. In that respect it is used as a debit card. I have even had them call me when out with friends and ask if they can buy a hamburger or whatever and ask how much they are authorized to spend. I tell them and they have never gone over that limit, ever. They know if they do, even once, that will be the end of the card. So far, they haven’t even wanted to go near that line.

    Children need us to teach them the dangers of abusing anything, whether it is credit or alcohol or over-eating. If we don’t teach them responsible habits at an early age, they don’t have the tools they need as they get older to make decisions they are going to be faced with sooner or later.

    Bottom line? It depends on the kids. I feel confident in my children that with guidance and example they can use the cards wisely. I trust them in this area because they have demonstrated to me that they are trustworthy. They understand that the maintaining that level of trust is the most important thing: if they lose my trust they will lose everything. Like toothpaste, once it squirts out the tube it is virtually impossible to put it back in.

  14. My mother made me an authorized user of her card when I was 14 and routinely getting sent out of town for sports competitions. There was never a problem. She trained me to collect the receipts and track my spending, and she’d audit my records when I got back. There would have been absolute heck to pay if there’s been a purchase of an unauthorized item, or if I’d overpaid for something, or if I allowed something bad but preventable to happen such that I had to spend my way out of an emergency. Of course, Mom liked to audit my personal spending and income too. I found that unreasonable, which is why I opened up a couple secret bank accounts at institutions she didn’t do business with.

    Later at 17, when I was in university, I got my own card with no hassle and was able to establish credit in my own right. By age 18 (I lived in Alberta) I had reached the legal age of majority for everything, including alcohol consumption. I don’t recall ever going overboard with credit.

    I’m not unique. One of my classmates started training to be an accountant as soon as she could add. She later joined her father’s business and bought a house of her own at age 18.

    The thing is that we were permitted to make money and credit decisions in a very supervised way at first. There was also rapid feedback since we had to pay for any indiscretions or mistakes out of our own income. We weren’t just given cards and told: “Here, don’t do anything stupid.” The responsibility wasn’t dumped on us all at once. That’s how we learned what was smart and what was stupid. It wasn’t just an explanation or a demonstration on paper. It was a real world experiment and there were real consequences to fudging up. But I had an adult with whom I could brainstorm ways to save up for something I wanted. It takes years of that kind of feedback and experimentation to develop sound financial judgement.

    One of the reasons my younger brother is so irresponsible with credit may be because he did not receive this kind of education or interaction.

  15. This is such a touchy subject.We might as well be talking about the war or politics.
    We put our daughter on our credit card. The deal is it is only for gas and she has kept her end of the bargain. She charges her gas and we use the points for gas cards to offset paying for her gas. We gave her a car when she was 16 in exchange for staying on the honor roll and being in sports year round. But she has to cover the insurance so she cleans her great-grandfather’s house every week to cover it. But she has kept this up for a year and a half and that is a long time for a teenagers.
    But I agree with everyone(I sound like a politician LOL) this is a slippery slope. I guess you just have to judge the kind of person your child is and then monitor them to no end!

  16. Depending on the child I could go either way on this. But then again I could go either way on certain adults having them. But if everyone was responsible we wouldn’t have credit card companies. I plan on teaching my kids good financial planning and as part of this is how to handle a credit card – cause face it at some point they could get one of their own without you. I believe in teaching the proper skills as many people including adults seem to have no idea of even how to do a buget!

  17. if credit cards for adults is bad, then credit cards for teens is worse. Same as giving a teen crack, so u can get them addicted. Why would anyone want to get someone else addicted to debt? When you use debt to pay for anything you are paying 2-3 times as much as you would have if you had saved and paid cash.

  18. This is such a terrific post!

    I tend to agree that teens should not have to battle with the urge to splurge using plastic. Personally I am against credit cards all together for any age, but admit that some people are responsible enough to at least pay off their balance every month. (Even the responsible ones should have an emergency fund that will keep them from using their credit cards to bail them out.)

  19. I suppose it depends if you’re willing to co-sign or have already been working on a method to help them pay for school. My parents refuse to do either so I was blindsided myself. My mother was in debt when I was young and I told myself I never would be, so I didn’t open up a credit card when I was 18. Had I known I’d be going to a school that costs $40,000 a year and understood the concept of credit, I wouldn’t have been so naive. (keep in mind parents; the more you make, the less federal aid your kids will receive, even if you’re not going to help them out at all)

    I can understand a persons disposition to credit cards after going through hardships of their own but I think teens could recognize the dangers of a credit card if explained properly, monitored, or witnessed. Simply seeing my mother’s trouble with debt was enough for me. Now that I have a credit card I only use it for purchases I could pay off immediately. I pay my card on time and in full each month except when I’m in a tight spot. I too have had my fair share of tight spots, thanks to the trouble of finding co-signers each semester. Still, I’ve paid less than $5 in interest since getting my card roughly 2 years ago.

    That a good credit score can lead to saving lots in interest on much larger debts most will eventually take on; buying a house, a car, unexpected emergencies, etc. Correct me if I’m wrong but the benefits of having a high credit score come at no cost, too, if you use it no differently than you would a debit card. It’s just a matter of convincing your children to do so.

  20. As a college student with 5 credit cards, I would argue that Teenagers have the same rights to credit cards as adults do. I learned great financial habits from my parents, because they were all so bad at managing money. Age is not a predictor of financial responsibility.

    This being said, no one has ever given me a credit card to use, then paid the bill for me. I can see how that would lead to a reckless habit of putting things on plastic without caring where the money comes from to pay for it. That’s a family by family decision, I guess.

    But I take issue with your downplaying of the importance of having a credit history at a young age. What will I do with the credit? Pay for school, buy a car, get a lease or mortgage on a house– sooner, rather than later. Your logic assumes that every teenager has a parent with good credit to cosign for them or support them financially, so they don’t need good credit of their own. Some of us have no choice but to stand on our own two feet.

  21. I agree with Melissa, it should depend on the kid.

    I think parents teaching and helping their kids learn about credit is a wonderful thing. Now there are other ways of doing this without putting the kid on your card. Maybe the kid can start out with a debit card.

    I was put on my mom’s credit card for a little while, then she helped me get my own credit card. Worked wonderfully! Yes I maxed out my credit card twice, but I was still learning how to handle an emergency. Guess I could have used Frugal dad at the time HA!

  22. This is crazy….I was just thinking about it today.

    My daughter who just turned 18 went to the bank to set up accounts. Of course the SOB’s who work there tried to push on CC on her but she refused – she reads your blog!!!!!

    You hit the nail on the head when you said,”I don’t think anyone should have a credit card if they do not have the means to pay it back themselves.”

    My kid has a debit card. When the money is gone….it’s gone. If she wants more money she knows she will need to work more. Easy and clear.

    Thanks.

  23. I think giving teens credit cards is absolutely ridculous. The fact that we are not teaching our children how to handle money and then decide to hand over credit is crazy. Teaching students to manage money should be the first step and giving credit cards to children will benefit nobody.

    Once someone has graduated from highschool they can make their own decisions about credit, but hopefully they will have the tools and knowledge to use it wisely. Sadly this doesn’t seem to be the case, especially for college students so I don’t understand how giving that opportunity to spend frivously and end up with debt earlier in life will help them.

  24. I, like a handful of others, think this idea absolutely ludacris. Just as I don’t intend to sell my child on the slave auctioneer’s block, I refuse to enslave them to debt and predatory creditors. It’s just not happening. I second the commenter who inferred disdain for the ‘altar of FICO’. I serve one altar, and one alone …and it surely isn’t adorned with Capital One cards and FICO reports.

    Many will argue that credit teaches responsibility, but cash budgeting carries with it the same lessons without the ‘you owe someone else your life’ part. In defense of individual liberty, I won’t stop a legal adult from obtaining credit, but I will not be enthused and I will not keep my mouth shut about my displeasure.

  25. I received my first credit card on my first day of freshman year of college, and within a year, I’d accumulated $2000 in debt. I just didn’t know how to use it wisely, and I didn’t understand interest.

    Had I had a cc as a pre-college teen, at least my parents would have been able to keep an eye on my spending. Additionally, it would be great if colleges offered mandatory personal finance workshops for incoming students.

  26. Credit is a priviledge, and until a kid has a job and can pay his own debt, giving him a card is just enabling bad habits.

    As far as teaching kids to budget with a credit card, millions of people learned that before credit cards were either invented or popular.

    As far as college, set them up with a bank account and debit card in their own name; they can’t run the balance into oblivion. Then they’ll learn what a budget is really all about.

  27. If the teen has an income, then I think having a credit card with a credit limit of a 2 week paycheck is absolutely fine.

    The teen can play around and learn early, without blowing themselves up. If they earn $200 every 2 weeks, they can’t do much damage………………… and if they max out at $200, then better they understand the penalty fees and such at this level, then at $20,000!

    Rgds, RB
    Sorry, forgot to add great post! Can’t wait to see your next post!

  28. “Proponents of teen credit cards point out that allowing kids to have a credit card will help them learn to use credit responsibly as an adult. Good thing those same people don’t feel the same way about alcohol.”

    Some of us feel the same way about both. No one sprinkles magic responsibility dust above your head on your 18th or 21st birthday.

    As others have stated, it depends on the person. Some people shouldn’t have a card at 45, while others are ready for one in their teens.

    We arranged for all of our sons to carry a family credit card at age 16. They drove 30 miles each way to school and gassing up otherwise would have been extremely inconvenient. I have always downloaded transactions each day as a matter of course and they’d be questioned about any untoward usage and be made to immediately reimburse us. From birth, they’ve been subject to much discussion over the idiocy of carrying a credit card balance–and they have a clear understanding of that issue.

    Upon the two eldest going to college, we pushed them to get their own cards both for credit building and for ease of purchases without us looking over their individual charges. After 1 year and 2 years use (and living/working year round at their colleges in excess of 1000 miles from us), they’ve had no problems.

    When moving off-campus this summer, the middle son had his utility deposits waived due to his credit history–that was an unexpected and beneficial result of his card usage. Because of their cards, both college students are able to make online purchases of books (needed) and other items (many of which are not “needed”)–and have access to more than ample funds in case of an emergency.

    CCs are a tool and like other tools, can cause harm if misused. That is no reason to forbid their use–imagine applying that logic to guns, chainsaws, and/or internet access.

  29. @Stacey
    I had a very similar experience, except I had my credit card for when I traveled across the country to visit my grandparents by myself (via plane). I was allowed to charge other things, but was required to pay for them myself unless it was an emergency.

    I think it depends on the child and sometimes I wonder if I didn’t handle money better than my friends since I was brought up not to expect things just because I wanted them. Don’t get me wrong, I wasn’t deprived, but I do recall my friends getting the designer clothes etc that I was not given(those teenage years, right!). Just a thought… and I realize that it’s not a one size fits all theory.

    Also, how do people rent cars without a credit card? It is my understanding that they do not accept debit cards for that.

  30. Stacey (32)–Debit cards are accepted for car rentals. The one major advantage of credit cards is for air travel, since credit cards often provide travel life insurance at no extra cost. Still, if that’s the major purpose it can (and probably should) be paid on the parents card, especially since it’s the parents who will ultimately pay anyhow.

    I like RB’s (29) point about two weeks of a kids pay being the credit limit. Financial advisors generally advise not borrowing more on a credit card than you can pay off within 30 days, so cutting it in half seems reasonable for a kid who’s just starting out.

    If they’re going to make mistakes, and they will, it’s better that they’re small ones.

  31. As a teen entering college, I think that people in my age group should use debit cards. Yes, I personally would be responsible enough to have a credit card as I obsessively monitor my personal finances and hate spending money, but after seeing all of my fellow college freshmen, I would have to agree that they are not ready for the responsibility of a credit card. My college allows students to pay for daily expenses like laundry and food with their ID and I think that putting money on that is a safeguard for the students. There really is no need for a credit card on campus, and moderating the spending by restricting it is the best idea.

  32. I didn’t have a credit card until I was 20 (I’m only 22, so not a very long time). I was probably in the minority in that I understood how credit cards and scores worked better than my parents. I remember telling my mom around age 18 that I needed a credit card if I wanted to rent an apartment someday. She said no because “the only way to improve your score is to carry a balance.” I was pretty sure this wasn’t true, so I went to MSN Money and showed her the explanation of how credit scores work. When I asked her who told her that, her reply was “A Sears card representative.” *sigh* When I finally applied for my current card, she asked “What are you going to do when you can’t pay it off?” My response: “I’m not going to charge more than I can pay off.” So far I’ve never even been tempted to not pay in full, even though my card charges 0% interest for balances under $250.

    Despite the lack of understanding, my parents were very responsible with the one credit card they have. When I was younger and wanted something I would always tell them to “just put it on the credit card!” Of course, they would explain to me that they still had to pay for it, but at age 7 I didn’t quite understand that :-) Now, though, I think it taught me valuable lessons about how to properly use credit.

    If I were a parent, and my husband and I were diligent about paying cards in full every month, then I might think about letting them have one, say, strictly for gas. I would definitely not get them a card when they go to college and say “Have fun!” Even though that worked for me, I don’t think it’s a good idea in general.

  33. The best approach to credit cards — for teens and adults — is to take Dave Ramsey’s advice! Don’t ever use them. If you want the convenience, get a debit card.

  34. Does anyone know of a credit card that limits what can be purchased on it — like no alcohol–just food, books, etc.

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