How Young Is Too Young for Your Kid to Have a Credit Card?

Teaching your kids how to properly utilize a credit card at an early age can not only help them learn about responsible spending and the consequences of extreme consumption, but it will also help them build a solid credit score for when they enter the real world.
03/04/2013 03:14pm ET | Updated May 4, 2013
FILE - In this March 15, 2008 file photo of VISA credit cards on display in Palo Alto, Calif. Visa posted a loss of $1.8 billion for the April-to-June period on an increase in its litigation costs. (AP Photo/Paul Sakuma, File)

Kids are learning about life at a younger age these days. From sex to suicide and every adult concept in between, kids are experiencing all of these real-life situations at early ages. Does that mean it is up to the parents to start teaching their kids about adult situations earlier?

Take money, for example. With major marketing campaigns focusing on the tween and teen population as one of their main sources of revenue, your kids are being bombarded with messages about products that they need to buy. Tweens spend an estimated $30 billion annually, and influence $150 billion of their parents' spending. Since tweens are such a force when it comes to buying power, isn't it a good idea to talk to them about spending and credit before they learn about it somewhere they shouldn't?

These days, many people equate credit cards with debt, which makes it a very touchy subject when it involves children. But credit cards aren't really the problem; the problem is that most people are using credit cards as extra income instead of a tool to help them build credit, manage personal cash flow, earn free rewards or weather financial emergencies. If used properly, credit cards can help you build an extremely strong credit portfolio, which in turn will help you gain access to the lowest interest rates, saving you money in the end.

This is what we should be teaching kids about credit cards: how to use them, not how to abuse them. Teaching your kids how to properly utilize a credit card at an early age can not only help them learn about responsible spending and the consequences of extreme consumption, but it will also help them build a solid credit score for when they enter the real world. This will make it much easier for them to buy a car, rent their first apartment or even get approved for a mortgage.

So how young is too young to start talking to your kids about credit cards? Here are some tips on what to do during certain age ranges to help you navigate the credit card talk.

Ages 3-6: Answer Their Questions

Around age 3 or 4, children start asking a lot of questions, like "Why is the sky blue?" or "Why do birds have feathers?" When they see you paying for things with a credit card, they may be inquisitive as to what the card is and what it does. This is the best time to answer their questions open and honestly, and to teach them a little about credit at an early age. A good response might be "It's mommy and daddy's credit card. I use it now and in a few days I'll get a piece of paper in the mail that tells me how much money I owe." Any answer that makes it clear that you will have to eventually use money to pay for what you just bought will work.

Ages 7-12: Talk to Them About Your Credit

This is a good age range to start talking to your kids about how credit works. When the credit card bill comes in the mail, sit down with them and explain what it means and how you will be paying for it. You might also want to show them how it works. If your child wants to buy something with their allowance, use your credit card to pay for it instead. Explain to them how the card works and that when the bill comes, they will have to pay you the money for their purchase. If they have already spent the money on something else when the bill comes, tell them that they now owe you 50 cents more, which will teach them about interest and why it's important to pay credit cards on time.

Ages 13-17: Add Them to Your Credit Card

Credit card companies will not approve anyone under the age of 18 for a credit card, but that doesn't mean that you can't help your kids start building their credit in their tween and teen years. It might seem like a 13-year-old is too young to have a credit card, but if they are connected to your credit card, it will be easier to monitor their spending and teach them about proper credit card use. It will also give them a head start on building a solid credit portfolio, which will make it easier for them to buy a car or rent an apartment in the future. If you wait until your child is 18, they may be eligible to get a credit card on their own, if they can prove a steady source of income, and then their credit spending will be out of your hands.

If you do decide to add your child to one of your credit cards, make sure it is one with a low limit, so they aren't tempted to run up a huge bill on your card. Remember, you are putting a lot of trust in your child. If they charge more to the card than you can pay off, it might end up hurting your credit as well as theirs. It might even be a good idea to apply for a new card and cap the credit limit at $500 or even lower. Constantly check your account online to monitor your kid's spending, and sit down with them every month to go over the bill.

Ages 18 and above: Get Them a Credit Card of Their Own

As soon as your child turns 18, have them apply for their first credit card. This will allow you to monitor their spending for at least a few months before they go off to college. If your child does not have a steady source of income, you may need to co-sign on the card, which will make it easier to monitor their spending habits.

For young adults in college, we recommend the Discover it card for Students. It offers a zero percent APR on purchases during the first 6 months as well as five percent cash back rewards on select categories and one percent back on everything else, which are great rewards for a student card.

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