You can help your teenager to start building their credit history early, instead of waiting until they turned 18 to start. To do this, you can get them a credit card while they are still teenagers.
You can do this by adding them as an authorized user on your credit card account, which enables them to have their own credit card and begin establishing their credit profile. Building credit is a long-term process, so you need to give your child a head start.
By having their own credit card, child can learn how to manage their money and make wise financial decisions. They also have the opportunity to learn from any mistakes they might make and understand the importance of paying their bills on time.
I believe that starting early is key to establishing a solid credit history, which can have a significant impact on their future financial goals, such as buying a car, applying for a mortgage, or even starting a business. This can be a good step in preparing your child for their financial future and helping them become financially responsible adults.
Now here are a few reasons why you should get your kid a credit card.
1. Child will build credit history
One of the main reasons you should get your child a credit card was to help them start building their credit history early. Typically, a person cannot apply for a credit card until they are 18 years old. However, most major credit card issuers offer the option to add children as authorized users and provide them with their own card linked to your account.
The age limit for authorized users may vary depending on the credit card company. Some companies allow children who are 13 years or older to become authorized users, while others do not have any specific minimum age requirements.
The primary advantage of adding an authorized user to your credit card account is that it allows them to build their credit history if your account remains active and in good standing. This means that by becoming an authorized user at a young age, your kid has the opportunity to jumpstart their credit-building journey several years before they are legally able to apply for their credit card.
Building a good credit score early on can have significant long-term benefits, such as lower interest rates on loans, credit cards, and mortgages. Additionally, having a solid credit history can also help with future financial goals, such as starting a business or making significant purchases.
2. Child will learn financial responsibility
While teaching children about using cash or a debit card linked to a bank account is an essential part of financial literacy, introducing credit cards and credit history is a significant next step. So you will essentially provide your teenager with a credit card to give them firsthand experience with how credit works.
It’s not quite the same as spending money that you know you have in your linked checking account. With a credit card, you can spend up to your credit limit without any guarantee that you have the money to pay off your balance. Therefore, using credit cards requires more self-discipline, which is a crucial lesson for kids to learn.
Having a credit card also provides an opportunity to discuss the importance of credit scores and credit history. By using the credit card responsibly and paying off the balance on time, your kid can start building a positive credit history, which will benefit them in the future.
At the same time, it’s important to teach them the potential consequences of irresponsible credit card usage, such as accruing debt and damaging their credit score. By emphasizing responsible credit usage, you can help child understand the importance of managing finances and making wise financial decisions.
3. Child can start earning rewards
While it may not be the most crucial reason to get a child a credit card, having an authorized user on a credit card that earns rewards is undoubtedly a significant benefit. Most rewards cards offer cash back, rewards, points, or miles on eligible purchases, which can be redeemed for various things, including flights and hotel stays.
Adding an authorized user to the credit card account means that their purchases can also earn rewards. This creates a win-win situation where your children can learn how to use a credit card, start building credit history, and earn valuable rewards from their purchases.
Furthermore, some credit card companies offer bonus rewards for adding authorized users, which can be an additional incentive for adding a child to the account.
However, it’s important to remember that rewards should not be the sole reason for getting a child a credit card. It’s crucial to prioritize the lessons of financial responsibility, credit building, and self-discipline that come with using a credit card, rather than solely focusing on rewards.
4. You’ll be able to track their spending
As a parent, it’s natural to want to trust your child with a credit card, but it’s also essential to have some control over how credit is being used. By adding an authorized user to your credit card account, you will be able to track their spending and ensure that they are using the credit card responsibly.
Tracking their spending gives you the opportunity to teach them about budgeting, responsible credit usage, and the importance of paying off their balance in full each month. It also allows you to monitor their purchases and detect any unusual or unauthorized spending, which can help prevent fraud and identity theft.
Moreover, tracking their spending can also be a helpful tool for setting limits and boundaries. By reviewing their purchases, you will be able to see if they are overspending in certain categories and have conversations with them about budgeting and responsible spending.
Overall, having the ability to track the spending of any authorized user attached to your credit card account gives you some control over how credit is being used and provides you with opportunities to teach your child about financial responsibility and budgeting.
