Should your teen use credit cards? Well, credit cards offer convenience, but their main purpose for teens (18 and older) should be to help establish a good credit history. Then, when the time comes, they can qualify for car loans and mortgages, be able to rent an apartment, qualify for favorable interest rates on all types of loans, obtain lower auto and homeowners' insurance premiums and qualify for a job (employers are increasingly using credit scores when evaluating job candidates).

TYPES OF CREDIT CARDS

Knowing Credit Cards. A basic credit card allows your teen to pay for things up to a certain credit limit (a fixed dollar amount set by the credit card issuer ). For example, your teen may have a $1,000 credit limit, allowing him or her to buy up to $1,000. Once paid back, they can again spend up to this limit.

You probably don't have to tell your child why credit cards are used. He or she has probably seen you use plastic to pay for clothing, groceries and many other things. What you should tell them is how to use credit cards ... so they stay out of financial trouble.

Has your teen recently charged a big-ticket item, like a new high-definition TV, or even something small like a new pair of shoes? If so, they'll need to know how much that purchase really costs. Let us help crunch the numbers with our GiveMe20 Credit Calculators.

Prepaid Cards Are Good Alternatives.

An effective way to avoid trouble is to provide your teen with a Prepaid Reloadable Card, which allows control over your teen's spending. And a reloadable card allows them to only spend up to the amount you have pre-deposited on the card . You can track their spending and teach them about budgeting. Click here for more information.

Understanding Debit Cards. These are tied to a credit union checking or savings account and allows your teen to spend up to the amount in the account. While a debit card may look and feel like a credit card, and can be used to pay for things in much the same way, it's a different piece of plastic.

A debit card is only a way to access the money that's in a credit union account. Phone cards and student campus cards are forms of debit cards because they let your teen spend the money that was put into the card. Like a credit card, a debit card also can act as an ATM card. There's no need to use a separate card to withdraw money from a checking account or savings account.