Credit Cards and Children – A Good Mix or Not?
A great debate has been waging in the credit card world lately: should credit cards be issued to minors or not? More and more credit card companies are developing credit cards that target this market group. While some view these cards as a smart way to help children learn how to be financially savvy, others consider it to be just one more marketing ploy set into action by credit card companies looking to expand their customer base.
Reasons to Get a Credit Card for a Child
There are a number of good reasons for getting a credit card for a minor. Namely, by having a credit card, a child can get used to making purchases with cards and monitoring their spending activity. The reality is that the world is becoming far more dependent upon plastic and paper money is becoming used far less often. In fact, many people rely solely on their credit cards and don’t bother to carry cash any longer.
One way a responsible parent can help prepare his or her child for adulthood is to teach the child how to properly use and manage a credit card. The facts are that an alarming number of people are carrying large balances on their credit cards and filing for bankruptcy because they failed to properly manage their credit cards. By teaching your children early how to use their credit cards in a responsible manner, you may be able to help prevent this from happening to your child.
Of course, in order to teach your child these lessons, you need to remain highly involved in the credit card process with your child. Discuss the various aspects of the credit card statement with your child and help your child create a budget that will allow him or her to make purchases with the card while making sure to pay off the card at the end of each billing cycle.
Another perk to getting a credit card for your child is that your child can start building credit at a younger age. That way, when it comes time for your child to apply for a car loan or a mortgage loan, he or she will have a stronger credit card history to back up the application. This will improve your child’s chances of being approved for the loan and may earn your child a better interest rate as well.
Concerns About Credit Cards for Children
One of the major concerns some have with credit cards for children is the fear that a child can build a huge debt before ever reaching adulthood. If this is a concern, you can apply for a prepaid credit card that allows you to add funds to the card as you like. If you are already paying your child an allowance, for example, you can give the allowance through the credit card. Then, your child can use the loaded card to make purchases. In this way, your child still experiences using a credit card without worrying about going overboard.