The Advantage of a Teen Credit Card
Today kids are the target of many credit card issuers as they try to get a share if the $1.2 billion that this demographic spends online using their parents cards. Is this a good thing? It really depends on the kid and on the parents. When cards are marketed towards kids 12 and under, its up to the parents to educate their children on how to manage their new plastic
Cards for kids under 18 do have some advantages but they can also have a huge downside. Your son or daughter isnt going to get a card without you co-signing, however the bill is sent to the kid and his or her credit report will reflect how they manage their credit.
The advantage of a 15 year old with their own card is by the time they graduate college, they will have a mature credit report. Assuming that the card is in good standing and payments were made on time, the new graduate will have a distinct advantage getting competitive interest rates when he or she needs it right out of school. The savings on these rates could be substantial.
The flipside of a mature good credit rating is a mature bad credit rating. We do not prepare teens to manage money. Only 7 states require a course in personal finance to complete high school graduation. Teaching credit management falls on the parent and often times they know just as little as their kids do about managing money.
Its your call because you have to co-sign. However if your son or daughter doesnt demonstrate responsibility around the house or at school, then it is probably not a good idea to let them loose with their own credit card even if it has a maximum balance of only $200.
Teens that have demonstrated responsibility might benefit even more from a credit card. Parents who okay a card are showing their trust in the kid and that can serve to reinforce positive behavior. The card can also be used as a “carrot” to motivate a less that stellar teen to straighten up his act and take his responsibilities seriously.
Our current economic crisis is due, in large part, to a large number of consumers who do not know how to handle money. Granted there have, and continue to be, predator lenders selling the idea that of course you can afford a mortgage even though you make a dollar above minimum wage. We have got to educate the kids in our schools or we will send out another generation of uneducated, and therefor irresponsible, consumers.
Of course this whole question may be moot if HB 627 is passed into law. If this Credit Cardholders Bill of Rights is passed, it will prohibit the issuance of credit cards to persons under 18.
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