3 Things Parents Should Consider Before Giving Their Child a Credit Card

Is letting a child use a credit card ever a good idea?
  • Eight percent of parents have given at least one of their children a credit card.
  • Giving children access to a credit card gives them an early start on building credit.
  • Using a prepaid card and setting a low spending limit can teach children how to manage a credit card while protecting their parents’ finances.

A poll conducted by CreditCards.com found that 8% of American parents have given at least one of their children a credit card. Children under the age of 18 can’t apply for a card on their own but can be added as an authorized user on a parent’s account.

Allowing children to use a credit card helps them build credit early while teaching them good financial habits — in theory. If the child can’t handle the responsibility, they could make unauthorized purchases and damage their parents’ credit.

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3 Things Parents Should Consider for Kids’ Credit Cards

Depending on the age and maturity level of the child, letting them use a credit card could be the right choice. Experts are conflicted on this topic, but many agree that credit cards help children learn the proper use of credit and how to spend responsibly.

Plus, it’s not a bad idea to give children access to money in case of an emergency. Ultimately, this is a personal decision, but there are three things parents should consider first.

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Can they handle the responsibility?

Some children will be ready to handle the responsibility of having a credit card, and some won’t. The child’s relationship with money up to this point will be a strong indicator. If they are able to manage it responsibly, they could be ready for a credit card.

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Start with a prepaid card first

Over 20% of parents said their children have used their credit card without permission at least once. Some children just won’t be ready for the responsibility, so parents should consider other alternatives.

A prepaid card is a good option in this scenario. The parents add a certain amount of money to the card, and this is all the child is allowed to spend. It’s a low-risk way to introduce the child to using credit cards.

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Set clear expectations

Parents who give their child a credit card should set clear expectations from the start. Let the child know what they are allowed to spend and what the consequences of unauthorized purchases will be.

Parents can protect their children and their own credit by setting a low spending limit and carefully monitoring all purchases. Many credit cards will allow users to set up alerts so parents will know about unauthorized purchases right away.

For more tips that you can pass on to your kids, take a look at the best money advice these eight kids with businesses have to offer.

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