Have you ever thought about getting your child a credit card?
If you want to start a friendly debate, ask a group of parents when they should give a child a credit card.
The answers will probably vary from “when he can pay for it” to age 105. Some parents will say, “Never!”
Every child and situation is different, however. Learning to use a credit card wisely may be compared to learning to use a kitchen knife. You could have a knife-free kitchen, but that wouldn’t be very practical. You could forbid your child to use a knife until he is 21. Or you could let him start using small knives, under supervision, and increase permission for him to use knives more and more independently as he matures.
Using the kitchen knife principle, consider these factors before you hand over the plastic to your child:
Does your child need to use a credit card?
If everything a child buys can be paid for with cash, why even bother with a credit card? Kids can learn budgeting without ever using plastic.
In fact, there’s something to be said for making early budgets with cash and envelopes. It helps keep it real.
If your child buys things online, is traveling without you, or for some other reason needs to use a credit card, you may wish – partly for your own sake – that your child had a card.
It’s better than letting a 16-year-old use yours.
Are you willing to co-sign or be the primary account holder, if your child is under 21?
Children under age 18 cannot enter into a credit card contract. The only way they can legally have a credit card is to be an authorized user on someone else’s card.
If you want your child to have a separate card, you’ll have to open one in your own name and add him or her as an authorized user.
As of 2010, a person between ages 18 and 21 must have a co-signor on a credit card, unless the person can show how they are going to pay the balance.
Have you taught your child how to use a credit card?
Before your child gets that first card, make sure he or she understands grace periods, interest charges, and how to avoid paying extra fees.
Talk to your children about identity theft and how to avoid it.
Explain how important it is to report a lost card immediately.
Before a child carries a credit card, he or she should be aware of the responsibilities and risks involved.
If you use credit cards as short-term payment tools, not as a way to live beyond your means, you’ve set a good example for your children to follow.
Can your child pay the credit card bill?
Using that first credit card can be a great learning experience. Most children don’t need help learning how to spend, however. It’s the paying off that takes practice.
Even if the child is paying the bill with an allowance or money earned from doing extra chores, it’s important that he or she does pay the bill.
Otherwise, it’s not really the child’s account. It’s just a way for them to spend your money.
Can you limit the financial risk?
You wouldn’t give a child a large, wickedly sharp knife the first time he tries to slice a cucumber. A small vegetable knife, used with a cutting board, would limit the potential damage. It’s the same with credit.
Don’t let your child have access to more credit than he or she could pay off in a short period of time.
Has your child been trustworthy?
Some children could be trusted with your life at an early age. Others may be absent-minded or have some lessons yet to learn about trustworthiness.
Nobody’s perfect, but if you have doubts that your child is ready for the responsibility of a credit card account, just wait.
Do you talk about credit card debt with your children?