Should Parents Keep Their Teenagers Off Credit Cards?

Among the many regulations included in the Credit CARD Act are a few that specifically target the ability of teenagers to get credit cards. These rules give more powers to parents regarding their teenagers’ credit card usage, namely by making them a necessity whenever a teenager applies for a credit card.

The new rules of the Credit CARD Act forces teenage credit card applicants to prove that they can pay off their debts before they get their credit cards. They can either show that they have the income to pay off their debts or that they can get a co-signer for their application, usually their parents.

That’s a good thing for parents since it gives them a bit of control over their teenagers’ credit card spending. A lot of parents are most likely going to decide to keep their teenagers off credit cards altogether, considering the high risk of credit cards. Still, they will have to find a way to give their teenagers easy access to funds in case of emergency. There is also the problem of helping their teenagers learn about financial responsibility.

Credit cards are not the only game in town when it comes to card payment convenience. One particularly popular option is debit cards. The good thing with debit cards is that payments are not taken as a short term loan but are taken against an existing deposit. That eliminates the risk of incurring debt. However, there are a few problematic details. Most debit cards allow card holders to overdraw which brings the problem of high overdraw fees. There is also less fraud protection with debit cards compared to credit cards and the rewards programs are anemic at best.

There will also be some parents who will reason out that it is better to get their kids credit cards as early as possible so that they can learn how to
manage their credit properly at an early age. This is naturally the approach that credit card companies would like parents to use.

Allowing teenagers to get credit cards early carries a lot of risks but it can be argued that the earlier they are exposed to it, the earlier they learn how to manage it. In such cases, the parents will need to keep a close watch on the credit card spending of their teenagers to correct any irresponsible spending. Allowing teenagers to get credit cards early also has the advantage of helping them build up a good credit score which can be very useful for them later on.

Should Parents Keep Their Teenagers Off Credit Cards?

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