When Your Kid Wants a Credit Card – ETB #160

The other day I was back in the Fox 35 Orlando studios to talk on air about another parenting topic. This time we were discussing kids and credit cards. Of course, a 3-5 minute morning TV segment gives little time to dig into the issue, so in this episode, I’m unpacking more of the conversations that need to be had and what to consider when your kid wants a credit card or debit card.

I think it is important to have these conversations with our kids rather than throwing out blanket approvals or denials. Each child even within your one family is different and may need different boundaries. There is not a set age at which getting a credit or debit card is right or wrong.

Why Does Your Child Want a Credit Card?

When your child wants a credit card, take time to find out why. What is their reasoning? You might be surprised! The reasons could be things like:

• Peer pressure
• No one takes cash
• Concern about losing cash
• Don’t feel safe carrying cash

My best advice for you is to refrain from rolling your eyes or quickly shooting down your child’s replies. Be slow to answer. Your job as the parent is to build a long last relationship through which you are teaching your child to be a responsible adult. Your child needs to learn to manage money, budget, save, and spend with your guidance.

How to Decide if Your Child Should Have a Credit Card

There are three main things to consider when deciding whether your child is ready for a credit (or debit) card.

• What is their age and maturity level?
• What is their understanding of money?
• Does their responsibility level match their request?

After evaluating these things, you need to have a conversation about what works best for your family. Involve your spouse and other family members as needed. This is not just about what is best for your child. The final decision has to be a good fit for the entire family as well as your family goals and values.

Teaching Your Child About Money Management

In order to responsibly use a credit or debit card, your child needs to understand money management. Walk them through things like:

• What an itemized credit card or bank statement looks like
• How to budget
• What needs to be paid at the end of a billing cycle
• How interest works
• How late fees work
• What overdraft fees are
• Paying minimum required payments vs paying off the full balance each month

Take time to show them one of your own credit card or bank statements to whatever detail you’re comfortable. Get out a calculator and have them run the numbers so they understand what might happen in various scenarios, interest rates, payment options, and overdraft fees.

Credit or Debit and Services for Kids

There are a lof of options out there these days to choose from when giving your child their first access to a credit or debit card. You’ll need to evaluate each to determine if they are a good fit for your family.

• Will you choose a credit card or a debit card?
• Are you trying to build credit?
• Are you trying to avoid overdraft fees?
• Are you willing to pay a monthly fee?
• Do you want extra features like rewards or allowances built into the system?
• Is a simple student account at a local bank a better option?

If your child is asking for a credit or debit card, task them with some of this research. What option do they think is best?

What If Trouble Comes with Using a Credit Card?

Remember that you are teaching your child in an environment where they can fail forward. Try a system and if it doesn’t work out, change the system rather than pulling all access. If your child misuses their credit or debit card, refrain from taking everything away. Keep the lines of communication open and encourage them to contact you first if they feel they need to make a charge outside of the usual approved purchases. Be tracking your child as needed, but not micromanaging. But, in the end, if the credit or debit card system is not working, look at other options as a family.

Start these conversation about money early and have them often. Help your child see you as a guide on this journey. Work together towards this goal of gaining financial wisdom and put them on surefooting as an adult for managing their own money.