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.