You can take some comfort in the fact that most major credit card companies require an adult to cosign a credit card agreement before they will issue a card to someone under the age of 18. But as a parent, you can't ignore the credit card issue altogether.
Many teens today use credit cards, and it probably won't be long until your teen asks for one too. If you decide to cosign a credit card application for your teen, ask the credit card company to assign a low credit limit ($300). This can help your child learn to manage credit without getting into serious debt. Here are some things to discuss with your teen before he or she uses a credit card:
Staying In Bounds. Set limits on what the card can be used for (e.g., emergencies, clothing).
The Minor Leagues. If putting a credit card in your teen's hands is concerning, you may want to start off with a Prepaid Reloadable Card, which looks like a credit card, but works more like a prepaid phone card. Prepaid cards are sort of the credit card minor leagues. You can load the card with any dollar amount you choose, and your teen can generally use it anywhere a credit card is accepted. Click here to learn more about Prepaid Reloadable Cards.
Getting The Hang Of It. A popular feature of teen Prepaid Reloadable Cards is they allow him or her to gradually get the hang of using credit responsibly. Because you can access account information online or over the phone, you can monitor your teen's spending habits, then sit down and talk with your teen about money management issues.
Take An Interest in Interest. Review the credit card agreement, and make sure your child understands how much interest will accrue on the unpaid balance, what grace period applies, and what fees will be charged.
Can't Pay Plan. Agree on how the bill will be paid, and what will happen if your child can't pay the bill.
Know The Calculations. It's important your teen understand how long it takes to pay off a credit card balance when making only minimum payments. You can help them better understand with our GiveMe20 calculators.
