There is no doubt that a Spend safe debit or credit card can help your children form great money handling habits. In the last few years, financial experts have seen more and more parents come up and get their children debit or credit cards.
A 2019 survey on Parents, Kids, and Money showed that about 17% of kids aged 8 to 14 years have their own credit cards. The number was about 4% in 2012.
There is no denying that both the debit as well as the credit cards can teach children about finances. However, each of these two cards comes with different rules and clauses that the parents should make the children understand.
With a debit card by their side, it would be impossible for the children to pile up debt. However, a credit card will help them to build a credit score that can help them in their future transactions.
So, before going and giving any one of these two cards to your children, you should consider the pros and cons to make sure you are making the best choice for them. Check the following section of this article to find out some interesting facts about the cards.
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How Old Should You Get a Credit Card?
You should be at least 18 years old to get a credit card in your name. However, you should not expect that your request for getting a credit card will be accepted by the financial institutions as soon as you applied for one. To get a credit card, you have to provide proof of income to show that your teenage child can repay the charges. You cannot show the monthly allowance as a form of income.
If your child is below 18 years of age, then you have certain other options. You can simply add the name of your son or daughter as an authorized user of one of your accounts. That will permit your teenager to purchase with the credit card and the activity of the account will reflect on his or her credit score. However, being the primary cardholder, you will be responsible legally and financially to repay the debts if your teenage child fails to do so.
The rules about getting a debit card are much simpler. To get a debit card for your children, you just have to open an account in their name and put some cash in it to get them started. Some financial institutions offer cards to children as young as 8 years if their parents become co-owner of their accounts. The common age for opening a checking account for the minor is 13-17 years.
Should I Get a Credit Card for My Teen?
One of the primary reasons for getting a credit card is, it will help them create a credit history. The credit card activity and payment history will establish the credit score which can help your children at the time when they want to get an education loan or buy a card on their own.
As debit cards do not help to create the credit score of a person, after turning adults, most children face difficulties in getting loans. Having a good credit score will help them to borrow money at a better rate of interest and also save you from the trouble of co-signing the loan documents of your children.
It also makes your children aware of fraud protection. They will be more conscious about the protection of their cards and make sure that they do not get it out of their hands.
Saving money is yet another factor that your children will enjoy if he or she gets a credit card. The cash backs they will get could help them to save money or to start a savings account. Other factors, like roadside assistance, can come in handy as well.
What are the DownSides
Overspending is the most blatant drawback of handing your children with credit cards. So, before giving them one, you should make sure that they understand the credit money offered by the card is a convenience and not a way to live outside of their earning capacities.
In most cases, the risk turns into a problem where there is a lack of financial education. As a parent, you have to make your teenager understand how they can keep their credit card spending in check. This is the simplest way to make sure that the debt does not pile up fast and becomes an issue.
Should I Say No to Debit Cards for My Teen?
There are some drawbacks to debit cards as well. The first one is that the fraud protection of debit cards is not as strong as credit cards. Another factor is that the debit card does not help your children to build a credit score on their own.
So, before choosing a debit or credit card for your children, you should consider the pros and cons of each carefully. Talk to your children to see which of these two they are comfortable handling. Only offer your child a credit card if he or she is responsible enough to handle the debt and finances.