Why Give My Kids a Student Credit Card?

by Guest Contributor · 19 comments

In the recently signed into law Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD), one of the key provisions is no one under the age of 21 can obtain a credit card unless a parent, legal guardian, or spouse is the primary cardholder (exceptions can be made if the applicant can substantiate certain income requirements in a petition). Without jumping into the pros and cons of this particular portion of CARD (OK, I couldn’t resist – I think the new under 21 restriction is ridiculous if you must know but enough of that) I would like to talk about some of my thoughts on why I will most certainly sign off on allowing my kids to have a credit card as early in life as possible (and why you should maybe consider doing the same).

Be Proactive in Teaching Responsible Credit Card Use

According to Sallie Mae’s 2009 credit card study 84% of all undergraduate college students have at least one credit card and the average number of cards each student has is 4.6. What this says to me is that chances are your child will have a credit card at some point in their life and likely as early as they are able to get their hands on one. This means that your child will either forge their credit card spending habits out on their own OR they will develop credit card spending habits while still under your guidance.

Parents who take a proactive role in teaching their kids how to use credit cards responsibly can play an extremely valuable and much needed part in shaping that child’s understanding of how credit works, how to manage credit responsibly, and how to make credit work for them rather than against them (this way, hopefully your child will never get to the point where they have to freeze their credit cards to ice their spending).

I am of the firm belief that as a parent it is my responsibility to teach my kids how to manage their money properly and how to be a responsible credit card user is certainly a big part of it. My goal is to sit down with my kids at an early age to apply for a credit card and learn how to properly use the card just like I will take them to the bank to open their first savings account at an early age and teach them the value of saving money.

Smart Student Credit Card Use is NOT the Norm

This may not be a shocker to you but most students do not use their credit cards responsibly. According to the afore mentioned Sallie Mae study, only 17% of students with a credit card pay off the balance in full every month. Only 17%! This means that a full 82% of all students with credit cards consistently carry a balance on their credit cards (the other 1% have a parent or family member paying their credit card bills for them).

What this means is that absent some sort of parental guidance (notice I did not say government intervention in the form of legislation restricting credit card use for those age 18-21 but parental guidance), almost all students will get a credit card and will mismanage their credit card by racking up interest charges.

Leaving your kids to learn about credit cards on their own will usually mean that they will end up like most of their peers described in the statistics above. It’s usually too late to unleash your parental personal finance wisdom if you simply ban your kids from having a credit card until they are age 21 and then attempt to talk things through when they may be out on their own thousands of miles away, graduated from school, and working in their new careers.

I will give my kids a credit card when they are in their teens and personally walk them through using the card to earn cash rewards, pay off the balance in full every month, and teach them the dangers of buying things without having money in the bank to pay it off.

Allow Kids to Learn First Hand on a Small Scale and in a Controlled Environment

One of the biggest reasons why I want to give my kids a student credit card at a young age while they are still under my roof is so that they can learn first hand the benefits and the dangers of credit cards but on a small scale and in a controlled environment.

Rather than allowing a student to get their first credit card at the age of 21, my goal is to start my kids out small when they are younger and under my supervision so that they can see both the positives and negatives of credit card use.

Just like many parents work hard to teach their young children the value of budgeting, savings, and giving to others by helping them on a small scale and in a controlled environment, parents can also teach kids responsible credit card use in the same way.

Many new student credit cards are designed with parents in mind too. The Current by Discover Teen Prepaid Debit Card allows parents the ability to restrict a child’s spending in certain categories like tobacco, hotels, alcohol in addition to featuring other built in parental controls so that you can choose just how much responsibility your child is ready to handle.

When Should I Allow My Child to Have a Credit Card?

As a parent the choice is of course up to you as to when you will allow your children to have a credit card but I am firmly convinced that I will allow my children to have credit cards at a very young age. This way, I can proactively teach them how to responsibly use a credit card.

You should seriously consider doing the same.

Author Bio: Joel is a CFP and the owner of a website with a unique credit card finder to help consumers easily compare credit card offers.

Money Saving Tip: An incredibly effective way to save more is to reduce your monthly Internet and TV costs. Click here for the current AT&T DSL and U-VERSE promotion codes and promos and see if you can save more money every month from now on.

{ read the comments below or add one }

  • Jose says:

    David, if you won’t jump in, I will. What is rapidly becoming the definition of an adult, 21 or older, is getting under my skin. The legal drinking age was a first and now personal finance? We are giving these young men and children weapons and sending them off to war to kill and die, yet we can’t trust them to drink responsibly or heaven forbid, have a credit card! It makes my head spin in frustration.

  • Robert says:

    Not all kids go to college. If your son or daughter joins the military, he or she is covered by the Soldiers’ and Sailors’ Civil Relief Act of 1940. One important provision of that act is that any credit issued to a person before that person joins the military is reduced to 6% while that person is in the military. I agree that all credit card debt should be paid off monthly, but if a debt is carried, paying 6% is a heckuva lot better than paying 26%.

  • Persepone says:

    My grandsons have had savings (age 10) and checking accounts (with debit cards) (12) since they were (and yes, they were earning money). They also have 2 credit cards (age 14) which they use for emergencies and pre-arranged purchases. They needed these for school trips etc. They were a really handy thing when applying to colleges. Carrying cash is sometimes problematical/dangerous. On-line purchases are best with debit/credit cards. Yes, they are a learning tool and today kids do live in a world where responsible credit card use makes sense. By the way, their mother had the same: first savings, then checking, then credit cards from a very young age. Saved lots of problems when she became an adult because she knew what other kids here age did not know about money, credit, etc. I do not expect problems with the credit cards. These 6 kids also share a “family plan” cell phone account and they have NEVER gone “over limit” on calls in the time they have had the phones (about 6 years). If you want kids to be responsible about money, you have to let them have access and some control so that they understand what things cost, how to save for what they want/need, and so forth. And, yes, they need to know about the family’s finances and how they fit into the bigger picture. Concrete and specific knowledge about the cost of things like groceries, heating oil and electricity is more effective than random yelling about eating what is on your plate, closing doors or turning off lights, for example.

  • BigSteve46 says:

    You are all wrong – money does grow on trees – I find it there all the time.

  • Peter says:

    I think it’s important for parents to be involved in their children’s education, and to teach them about the proper management of their money. With that said, I’m not so sure that you have to get your kid a credit card to teach them about reponsibly managing money, or responsibly using credit cards. Why not teach them about the power of saving up and paying cash for the things they buy? I think that would be a much more powerful lesson in the long run. Yes, you can teach them about credit cards, but why set them up to learn the hard way when you can teach them about saving/investing and paying cash? If you do that they’ll be far ahead of the curve. I think more people should teach their kids that it is ok and possible to live life without credit cards.

  • FinanciallySmart says:

    This article is very insightful and I am in total agreement with you. As parents we should instill that responsibility of money management where Credit Card is concern. I hope parents will not see the CARD policy as an hindrance but use it in teaching their kids.

  • moneyblogger1 says:

    This is a great opportunity for children, with a lot of parent activity, to learn about credit cards. Teaching them to pay bills, regulate their spending, and build credit at the same time. That is, only if the parents are involved enough to help nurture the child finality understanding.

  • Ken says:

    Given the fact that they will be offered one as an adult, I think it’s OK to allow one if the child is working age (14-16). If he/she uses the card, he/she makes the payements. It’s a risk but I do think we as parents need to be proactive and educate our children.

  • partgypsy says:

    But my ambivelance, though I think it was beneficial, not sure if it needs to be a law.

  • partgypsy says:

    I’m not sure how I feel about the new law. (20 years ago) though high school and college, I had a checking account and used that for depositing and paying for the things I was responsible for (in college, that was all living expenses). After college I applied for a credit card. Wouldn’t happen today but my first application was turned down: insufficient credit. So I applied and received a store credit card, used that, paying off the balance, and then on to a regular credit card. I’ve never not been a responsible credit card user. On the other hand I knew kids in college who had cards through their parents who spent irresponsibly. Maybe I’m an exception, or maybe the fact I didn’t get a credit card until I had already learned good financial habits through a checking account and was older and more mature was to my benefit.

  • coulson pritchard says:

    This is not really physical that you are not able to pay your bills and using credit cards.there was an easy way for my parents to let me know since it seems like the only way to truly understand is if the money had to come out of my own pockets. Try to understand Business Service and their usage in a proper way.

  • Mr. ToughMoneyLove says:

    Another credit card evangelist who makes money promoting credit cards. Do not pay any attention. My three sons made it through college just fine without a credit card. Surprise – they are debt free. I get so tired of reading posts like this.

    • Credit Card Chaser says:

      @ “Mr. ToughMoneyLove”

      Very interesting – you managed to roll up the Genetic Fallacy, an Ad Hominem Attack, an Appeal to Motive Fallacy, and the Cherry Picking Generalization all into one brief comment. Quite impressive that you were able to combine that many logical fallacies into just one quick comment. Maybe next time 🙂 – Joel

    • MoneyNing says:

      Let’s keep it civilized guys.

      It’s true that the author is most likely making money from promoting credit cards, but he’s talking about the benefits no different than a Starbucks personnel mentioning the richness of its coffee, or a tailor selling the fact that we look good in the suit.

      Credit card has its benefits but can obviously be misused. Whether you are debt free or not has nothing to do with credit cards, but everything to do with the user.

  • Jerry says:

    Well, it doesn’t say that kids under 21 CAN’T have cards. It says that a parent must be the primary card holder. I think it should be like a loan and that a parent or guardian should be a co-signer but the bills come the person taking out the card. The child would feel more responsibility but you have that insurance by having a co-signer. Kids DO need to learn responsible credit card use. If they have the guidance of a responsible parent then they are the lucky ones. It appears there are many kids (and adults) that are running amuck with their credit cards. And, it just may lead to economic ruin. Oh, wait, we’re already there… 😉

  • Charles says:

    It was hard for me to understand that money in fact didn’t grow on trees until I was on my own and had to pay all the bills. I wish there was an easy way for my parents to let me know since it seems like the only way to truly understand is if the money had to come out of my own pockets. Getting a credit card and having my parents talk to me about it seems to be a good way to get this done and I will certainly try it when I have kids.

  • kenyantykoon says:

    personally i think that kids should be taught that money does not grow on trees from the age they can understand words. This is because they are very impressionable during the very first years of life and they need good habits instilled into them to counteract all the advertisement that they are pounded with all day long. If they learn the value of money at a young age and the parents see that they are responsible withe cash, i see no qualms as to why they cannot have a credit card(that has some sort of credit limit so that they dont get tempted to buy all the clothes in the mall)

    • Credit Card Chaser says:

      You make a great point about the impact that advertising can have even on young kids. I agree that this makes it even more important for parents to take a proactive role in explaining how to responsibly manage their money. – Joel

  • Judith says:

    I’ve been telling my kids about credit cards almost every time I pay. This way, they learn about spending through practice. When they can get a credit card,

    I also plan to let them pay for it and then talk to them when they see the huge bill so they understand that nothing is free and EVERYTHING adds up.

Leave a Comment