It’s pretty safe to say that we won’t get giving our daughter a credit card for her 8th birthday next month. I can’t believe how fast eight years have passed, and I bet the next eight will go by even faster. While I’d like to bury my head in oblivion, we are getting to the point where financial and life education are very important. Hopefully, our daughter will be as smart as possible about the real world before we turn her loose to become a productive member of society. Part of that will include learning about debt and credit cards. The question today is, should kids have a credit card?
Pros of Giving Kids A Credit Card
Hands On Financial Education
By giving kids a credit card while they still live at home, parents can keep tabs and set limits. The first credit card would likely be a joint venture between child and parent, which would allow family discussions about credit limits, interest rates, purchases, payments, and how to decipher a credit card statement.
Many pros suggest giving kids a credit card to build credit, but I don’t agree with that. Kids will have plenty of time to do that as they become young adults. I don’t know why a teen would need a credit history in most circumstances.
Credit Cards Can Be Replaced If Lost or Stolen
Kids are not the most responsible people. Even with good intentions, they are easily distracted and don’t always make the best decisions.
I’ve had my credit card information stolen a couple of times, and in both instances, I did not have to pay the charges in question. It was an inconvenience, but no money was lost. With cash, it’s gone. Even with debit cards, you may be responsible for all or part of the charges if the card is stolen. If my kid is going to lose something, a credit card would be the lesser of the evils.
Cons of Giving Kids a Credit Card
Credit Cards Mean Instant Gratification
Kids might start to equate credit cards with money or instant gratification. Instead of waiting for actual cash in hand, they might use the card thinking they will have money by the time the bill comes. This is not a problem limited to children, I know many adults who bank on this philosophy.
Credit Might Make Kids Spend More
When Jim was in high school, his parents gave him a gas card that was supposed to be for fuel only. When his friends found out, they talked him into buying snacks for the whole crew. Being popular in high school is just about as important as breathing for many kids. Buying crap for your friends can certainly make you popular, at least for the short term.
Parents Could Be Responsible For Kids’ Bad Decisions
If parents do get a joint credit card with their kids, it’s important to cancel or remove themselves from that card once the child becomes an adult. You don’t want junior carrying bad debts associated with your name long after he’s moved out of the house.
I had a friend whose kid did just that. My friend had no idea until he got a denial on a home refinance. His son stopped paying the bill and also forgot to let Dad know he was broke, so credit scores for both father and son went into the toilet.
Will I Give My Kid A Credit Card?
We have a few years before we have to decide, but I think that we will let our daughter apply for a credit card, probably when she starts driving. I’ve been in a couple of emergency situations where a credit card would have been handy, and I want her to have the ability to call a locksmith or have a car repair done if necessary.
When I went to college, I was book smart but money stupid. I applied for my first card to get a free t-shirt, with no clue about interest rates or how much credit can cost if you use it incorrectly. I don’t want my daughter to be that dumb when it comes to anything about money.
How To Get Kids To Understand Credit Cards
I know kids can and will make mistakes, but I hope to lessen the chances by teaching our daughter about credit cards.
Let Her In On Our Past Mistakes
I think it’s important to share past financial mistakes with your children. Some parents might be afraid to come clean, thinking the truth might give kids permission to repeat bad family behaviors, but I don’t think so. I believe being honest makes kids more likely to ask questions and seek help if they aren’t sure about a financial decision.
Make Sure Kids See and Understand the Credit Process
Parents and children should go over credit card statements together. That way everyone can see if all charges are correct and understand when the bill needs to be paid to avoid interest charges. If parents aren’t going to make sure the bill is paid in full every month, then I don’t think they have any business letting their kids get a credit card. You can teach irresponsible habits as well as you can teach good ones.
Do you think kids should have credit cards? When did you get your first credit card? Did you know what you were doing?