In a society where credit and debt problems spread like the plague, deciding whether or not to give a teenager a credit card is a hotly debated topic. Some would say it's like handing your kid a loaded gun, while others would say it's a valuable opportunity to to teach him financial responsibility. Ultimately, it's a private decision for your family, though there are several benefits to giving your teen a credit card.
Building credit before leaving the house is a big advantage for a teen with burgeoning independence. A good credit score can help a young adult rent an apartment, secure a car loan and make other financial decisions without a parent as a co-signer. This gives both of you more freedom when she decides to move out on her own.
A teenager with a credit card has the opportunity to learn about managing money and the risks and consequences of debt. If you give your teen a card and want her to learn these life lessons, she should have primary responsibility of managing the card and paying the bills -- but with your close oversight.
As your teen gets older, she'll be under your protective wing less and less. She may even find herself far from home in an emergency situation -- and needing money. A credit card will get her out of jam during those times when you're not in the immediate vicinity.
Alternative to Cash
A credit card lessens the need for your teen to carry a lot of cash. The consequences aren't as severe if your teen misplaces her wallet -- as long as she cancels the card when it's lost, making it a safer option.
The benefits of a teen with a credit card can be offset if you're not careful. Teaching your teen to manage a credit card well is a major responsibility -- you don't want her to suffer from a bad credit score for several years. Be sure that the card has a low credit limit and encourage your teen to spend no more than 10 percent of that limit. Go over the bill together and teach her to pay off the balance in full each month, instead of just the minimum amount due. Make sure it's clear that the purpose of the card is to build credit, not to fund your teen's amusement habits. It's best if she has her own income and is using it to pay the bills.