Guidelines for Teen Credit Card Use
Give your teen an advantage and ensure they’re educated…
Being the most privileged kids in the world doesn’t guarantee that America’s youth have good money management skills. In fact, most come out of college without a clue about finances. A number of studies have shown that America’s youth are inadequately prepared for financial responsibilities once they leave home. That’s why setting some guidelines for your teen now can set them up for a brighter future tomorrow.
College campuses have long been the target of credit card companies. But with 31.3 million high schoolers working and having disposable income in the United States, their sights are set even lower. In 2006, teens spent $195 billion of their own money compared with $94 billion in 1999, according to a Harris group study. With more money to spend, teens are even more attractive to predatory financial institutions. Many offers are now being sent directly to parents marketing co-signed ‘teen credit cards’ with low limits and stiff interest rates. So what’s a parent to do?
One great option to help young people manage their money is a prepaid credit card. There are a wide variety of prepaid choices, with companies like Allow Card of America, Inc., offering cards designed specifically for kids and teens. Prepaid credit cards allow parents to deposit money directly into an account in their child’s name. Purchases are then deducted from the account balance anytime the card is used. Parents can add additional funds from their checking account or credit card anytime they choose.
A prepaid card is a great tool to teach your teen about managing money while giving them a sense of financial independence. But prepaid cards won’t help them build their credit history– which may be important to many parents. In this case, you might consider co-signing a student credit card or one of those ‘teen credit card’ offers in the mail. If so, here are some basic guidelines for responsible teen credit card use:
1.) Set limits on what and where the card may be used.
2.) Educate your teen on fees and interests and make sure they understand all the rules.
3.) Look over and explain monthly statements together.
4.) Use a register to track all transactions and the current balance.
5.) Report and cancel a lost or stolen card immediately.
6.) Save all receipts and compare to the statement monthly.
Setting guidelines and working hand-in-hand with your teen is the best way to teach them about responsilbe money management. The only person who can provide them the real-world experience they need– is you. Taking a proactive approach will ensure they avoid common mistakes and pitfalls which could have a long-term negative impact on their future.
