Deciding When Your Teen Should Get a Credit Card

One Mom's Five Step Plan for Establishing Ground Rules with Teen Credit Cards

As a parent, for me to give my teen a credit card, the following would have to occur. As a teen is still under my roof and should not have the type of expenses one might need a credit card for (which is non-perishable items) - so the credit card would be for emergencies only, unless the teen is very, very financially fit.

Step One: Teens need to have an income

A teen should have a job with income, outside of their allowance. This puts them on a path to responsibility and if they have the credit card, they can pay it off - which is as it should be. No job, no credit.

Step Two: Teens need to have a savings account

If your teen has not learned the importance of saving, and accruing funds - they don't know what spending really means. Some kids really think that you just go to the bank to get money with a plastic card (and forget that the money was earned as is not from an umlimited fountain of wealth)

Step Three: Teens need to have a checking account

This will teach your teen yet another way money is exchanged, and help them with record keeping which is needed for staying financially fit. By using a check register to keep track of expenses, your teen will see where and when they spend.

Step Four: Teens need to have a debit card

If your teen is successfully using a checking account, it's time to introduce a debit card. Many of these are visa or mastercards as well, but you can have that option turned off the card. This will teach teens how easy it is to get cash from a machine, and how easy swiping your card for inconsequential items like a pop and burger can turn into a zero account balance.

If the debit card is tied to their checking account, the money is immediately removed. If you allow them the visa or mastercard check cashing debit card then they may have a delay. If your teen can't handle this form of credit without overdraft fees they are not ready for a credit card.

In all cases, a debit card tied to a checking or savings account should be sufficient for a teen even in an emergency situation. If your teen is travelling or away at college, you may consider them using a parent credit card for approved expenses which you discuss ahead of time, or allowing them to apply for their own line of credit.

Step Five: Teens should apply for their own line of credit

Eventually your teen will be a grown up, and unless you've taught your teen to be a cash only person, it's likely that establishing credit is not a bad idea. If they have shown responsibility in the preceeding steps and are holding down a job, then allowing your teen to apply for their own line of credit can be a good thing.

Be sure to help your teen decide what sort of card they need, and an American Express may be the best bet for a starter card as it teaches you to pay off in full each month.

If you've adhered to the above plan and taught your child all you can about budgeting and having enough money to cover your purchases, you can do no more as parent's eventually have to let control of their teen go so they can grow into adulthood where they will make their own financial decisions.


Tips in Choosing the Best Credit Card for Bad Credit

Having bad credit does not mean one can never apply for good credit cards. Because of so many people having problem with bad credit, credit card companies saw the potential in providing service for this people. Thus, credit card companies came up with bad credit credit cards. As the name suggest, these credit cards are especially created to cater people with less than perfect credit history.

Bad credit credit cards or secured credit cards do come with higher interest rates and fees to make up for the risk from customers who have a poor credit history. When compared with standard credit cards, these cards also impose lower credit limit for its card holders since they were not able to present impressive credit.

However, this doesn't mean that bad credit credit cards are inferior since these cards can be a tool for people with bad credit to regain their credit reputation. Just how is this possible? By submitting regular payments on your account, secured credit cards report to the major credit bureaus to ensure that your credit report is updated.

Understandably, not all credit cards for bad credit that are offered in the market are great and it is up to you to do your choosing carefully. One of the first things you should look for with a credit card for bad credit is whether it reports to the major credit bureaus. There are some secured credit card providers that do not have this important provision. This is crucial in helping you rebuild your bad credit history.

Of course, just because you don't have an excellent credit doesn't mean you have to settle for unreasonably high rates that credit cards impose on their clients. It is possible to find secured credit cards with interest and fees that do not take advantage of your bad credit.

Another important factor to check about secured credit cards is the minimum amount of deposit required to get an approval. This security deposit is held in your account in case you default on your debts, thus giving the bank a guarantee that they can use this money to pay for the debts your defaulted. Take note also that some banks place this security deposit in an account that bears interest. Make sure that you'll be able to claim this security deposit along with its interest after building your credit.

The use of your security deposit may also differ depending on your bank. Some creditors will take your deposit if you miss a single payment in your account while some banks allow at least 5 to 6 months before deciding that the card holder has completely defaulted his debts.

Most importantly, choose a secured credit card that allows you to convert your account to an unsecured one after a certain period if you can prove that you are submitting all your payments dutifully and timely. This way, you can enjoy the privileges that unsecured credit card holders enjoy such as lower APR, higher credit limit, and less restrictions.

Source: CredoDebit