Credit cards offer a good way to build credit. This is especially true for teens with low incomes or limited cash. 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. Many banks offer teen-friendly options that come with features such as a free teen debit card and online banking.
Explain to your teenager how they can open an account. Tell them what constitutes an approved application, and show them the steps for using their new card. Talk about the importance of making payments on time and how a late payment can damage their credit score.
Add them as an authorized person to your account to help them build credit. By allowing them make purchases using your line of credit and in your own name, you can also help them establish their credit. You should be aware that certain creditors may have an age restriction for authorized users under the legal age of 18. Check with your creditor before adding your teenager.
Step 2: Have them pay their bill on time
It's a great way to show your teenager the importance of being responsible. It helps them to establish a credit record, and it shows the credit agencies that they are able pay their bills.
Step 3: Set spending limits for the card
Give your teen a credit limit card if you are worried they will go over. This will let them know how much money they have to spend, while allowing you to watch their spending more closely.
Step 4: Ask them about their finances
It's crucial to monitor your teen's credit card usage, and ask them regularly about their financial goals and budget. This allows them to ask questions, and you can learn from them.
You should ultimately choose the best credit card for your teenager based on his or her needs and goals. There are also cards with additional benefits that help your teen build credit and earn airline miles or cash back.