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Credit cards and kids: Should you let your high schooler have a credit card?

by Barbara Marquand

Your 16-year-old wants a credit card for essential shopping trips and school excursions. That way, she explains ever so reasonably, she doesn't have to carry wads of cash or drag you along to the mall, and she's covered in case of an emergency.

Meanwhile, you envision wild spending sprees and whopping credit card bills. Should parents ever add teens as secondary card holders to their accounts? The answer depends on a variety of factors, and there is no correct answer for everyone. Here's what you should consider:

Financial experience before credit card

Children who have handled a savings account, earned money from household chores or a part-time job, and saved money for special purchases are better prepared for handling financial responsibility than those who haven't had any experience with making and saving money. Make sure your child is grounded in some basic money know-how before handing over a credit card. Have you taught your child about interest rates and how credit cards work?

Your kid's maturity

Kids mature at widely varying rates. Consider your child's personality and maturity level. Can you trust your kid to keep track of a credit card and follow your limits for credit card use? Not sure if they'll be able to handle it? This may not be the area you want to give them a chance to prove you wrong.

The good and the bad

Under the CARD Act, those under 21 years old will find it hard to get a credit card without providing income information, which could make it challenging for most students to start building good credit. So, on the up side, your child could get a nice start on their credit profile if the responsible credit use is reported to any of the three major credit bureaus. However, keep in mind, any negative items that happen on the account will affect all account holders. If you forget a payment on the account, it can harm your teen's credit as well as your own.

Credit card use: The ground rules

Decide how your child should use the credit card. Will there be a spending limit? Will your teen be allowed to use the card only in certain situations or for certain purchases? How will your teen pay for purchases? Will you keep the credit card and give it to your child as needed, or will your teen hang onto it?

Credit card policies

Credit card companies' policies for secondary card holders vary. Some have minimum age requirements. Some provide a different number for a secondary card; some provide the same number. Not all companies list purchases by the secondary card holder separately on the billing statement. Most companies report the primary account holder's payment history on the secondary card holder's credit report, although some companies don't do this for card holders under 18. Check your card issuer's policies for details.

Deciding whether to give your teenager access to your credit card account is a big decision. Give the matter plenty of thought and do what's best for you and your kid.

Published 11/22/12

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