Credit cards allow teens to begin building their credit. A credit card can help them earn rewards for their spending and build up a strong credit history, while also teaching them how to manage their money responsibly.
How to Get a Teenage Credit Card
In the early years of your teen years, it's hard to know how to get started with financial responsibility. You can give your teen the tools he or she needs to build credit when they are older by laying the groundwork early.
Step 1 - Open a checking or savings account for your teen
They can learn budgeting basics, how to pay their bills and avoid debt by opening a checking account. Some banks have options that are geared towards teens, with features such a teen credit card and online bank.
Your teen should be guided through the account opening process, explaining to them what qualifies for an approved card application and how to use it. Disclose the consequences of late payments and explain how they can hurt your teen's credit rating.
Adding them as an authorized user to your account is another way to help your teen build their credit by allowing them to make purchases in your name and using your credit line. It's important to note that some creditors restrict underage authorized user, so check with them prior to adding your teen.
Step 2 - Have them pay the bill on time
This is a good way to instill responsibility into your teenager. It also helps them establish a payment record and show the credit bureaus that they're able to pay their bills.
Step 3: Set a spending limit for the card
If you worry that your teen will exceed their credit limit, give them a pre-determined amount of money they can spend. This will help them to understand what they can spend, and you'll be able to keep a closer eye on their card usage.
Step 4: Check in with them about their finances
Once your teen has a credit card, it's important to stay on top of their usage and check in with them about their budget and financial goals. This will allow your teen to ask questions and learn from you.
Ultimately, you should choose the right credit card for your teen based on their needs and goals. You can also find cards that come with added benefits to help your teen earn cash back and airline miles, while also helping them build credit at the same time.