Giving Your Child the First Credit Card

Many people believe that giving your child the opportunity of having a first credit card is an important step to your child’s financial development, however, it is important that before you entrust a credit card to your child,  he/she understand the meaning of financial responsibility so that a good credit history can be established.

One of the best ways to start this process with your child  is through a secured credit card, through your line of credit. A secured credit card allows for the convenience of purchases and for emergency use.  Unlike the unsecured credit cards (regular credit cards), secured credit cards have limits and is capped to the amount actually deposited into the account at any given time. Once your child can prove he/she is responsible in managing this type of credit card, then your child can evolve to the next step and apply for a regular credit card (if he/she is of the legal age, 18) or be added to your credit card account.

Here are some pointers to discuss with your child before handing over that secured credit card:

  • Go through the complete terms of the card including fees, interest rates, and payment due dates
  • How all introductory rates work on credit cards and when the promotion will end and what the interest rate will become
  • How interest rates can affect the actual cost of something and that a $10 charge today can become a $25 debt tomorrow
  • Budgeting and how your child should not charge more than he/she can actually afford to pay
  • The value of paying on time and how important it is to build a good credit history
  • The value of paying in full and how much money it can save you in the long run if it can be done
  • Not exceeding the credit limit as additional fees and penalties may be charged
  • Consequences of not handling finances properly