In the United States, a person under the age of 18 cannot legally sign a contract without a co-signer. However, more and more parents are getting credit cards in the names of their children. Should credit cards be available to people under 18?
It's really up to each family to decide what to do. Most of the time, parents decide to get a credit card for their child for one of these reasons:
For emergencies
letting the child (likely a teenager) shop for school supplies on their own
Buying lunch and other things you need when you're out with friends
For travelling (perhaps the child visits family members regularly)
Consider your child's age and level of maturity when deciding whether or not to give them a credit card. A child in elementary school doesn't know much about what money is or how people get it. On the other hand, teenagers usually have a better idea of how money is made and what it is used for, and they could be shown how to use a credit card properly.
Many parents think that giving their teenager a credit card is a good way to start teaching them about money management. If this is your goal, you obviously don't want to give your child a credit card and tell them to go to town. You'll need to talk to the child about why he or she needs a credit card, set limits, and talk about how payments will be made. Will your teen have to pay back the money that was charged to the card? If so, you and your child should talk about this as well.
Credit cards aren't the only option.
Instead of a credit card that earns interest, parents might want to think about a debit card. Giving your teen a bank account with a debit card teaches them to spend money they already have instead of spending money they will have to pay for later. How you put money into the account is up to you, but some parents set up "direct deposits" for their kids' allowances, which the kids can get to with a debit card.
Another good choice for younger people is a "Charge Card." You can use them to buy things, but you can't carry a balance from month to month. Instead, you have to pay off the balance in full every month. This will teach your child how to be responsible with "charging," as long as you don't pay it off for them every month without talking to them about it or making the teenager use money from a part-time job or babysitting to pay the bill.
If you want to get your child a credit card, charge card, or debit card, make sure you know the rules of the account with the company you choose. Some credit card companies only let people of a certain age have "additional cards," while others let anyone of any age have a second card. Charge cards are the same. There are banks that offer checking or savings accounts for teens that come with debit cards. These accounts are made to meet the needs of teenagers. That might be the best way to teach your kids to be responsible with money.
How to Teach Children Financial Responsibility with Credit Cards, Charge Cards, or Debit Cards
When getting a card for your child, it's important to spend some time with them and teach them the basics. Don't assume that they already know this information. If you want to use the cards to teach people about money, here are some things to think about:
Don't let your kids give their cards to their friends for any reason.
Every month, look over your bank statements together and compare your receipts with what you bought.
Teach kids to pay more than the minimum payment, and explain why it's important to do so.
Talk about credit scores and how they affect people's lives.
