Credit Card Solution

Some people find it humorous that anyone would even consider giving their child a credit cad, and this is certainly a valid response considering the surge of debt among young adults due to irresponsible spending. However, with the right kind of card and the right restrictions in place, credit cards for minors can present a number of advantages for both the parents and the child. Before proceeding it is important to understand that a credit card cannot actually be issued to a minor, so the following information pertains to authorized user accounts for minors that are attached to an adult’s account with the parent or guardian’s consent.

Allowances and Activities

Children frequently need money for recreational activities such as field trips and vacations. Giving a minor cash is not safe, not only because it could be lost or stolen, but also because it could be spent frivolously, and there is no way the parent can account for the expenditure once the money is gone. Furthermore, funds kept in a debit or credit account are insured along with the card, so even if the card is lost or stolen, the funds are safe. As such, many financially responsible parents issue their children’s’ allowances within their own bank account and give them a limited debit card to use. This gives the parent greater control over their children’s’ expenditures and lets them see what the money is used for, while also preventing the funds from being lost or stolen.

Learning Finances

In modern times, credit and debit cards are integral parts of daily finances. Giving a child a credit or debit card is a great way to introduce them to digital banking as well as money management. In fact, some experts believe that giving a child a credit or debit card at a young age can give them the preparation needed to prevent irresponsible spending habits and unnecessary debt later in life. As an authorized user, or “secondary cardholder,” the child has the opportunity to learn how debit card balances work and how easily funds can dwindle when the card is used irresponsibly.

Credit vs. Debit For Minors

In general, every charge made on a credit card incurs interest (unless the card is still within the terms of the introductory offer or unless the entire balance is repaid within the grace period), which is why it may be best to give a child a preloaded debit card, also known as a gift credit card. However, parents need not be afraid of giving their child access to a credit account as a secondary cardholder, as it is possible to maintain limits and set restrictions to prevent the child from running up a huge balance. Ultimately, the decision to issue the child a credit card or a debit card should depend on the responsibility of the individual, and the preference of the parent or guardian.

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