Teens and Credit Cards. A Good Mix or Trouble?

Today kids are the target of many credit card issuers as they try to get a share if the $1.2 billion that this demographic spends online using their parents cards. Is this a good thing? It really depends on the kid and on the parents. When cards are marketed towards kids 12 and under, its up to the parents to educate their children on how to manage their new plastic

Kiddy cards have some advantages but they also have huge downsides. Your son or daughter isn't going to get the card without you co-signing, however the bill will go to them and not to you.

The advantage of a 15 year old with their own card is by the time they graduate college, they will have a mature credit report. Assuming that the card is in good standing and payments were made on time, the new graduate will have a distinct advantage getting competitive interest rates when he or she needs it right out of school. The savings on these rates could be substantial.

The flipside of a mature good credit rating is a mature bad credit rating. We do not prepare teens to manage money. Only 7 states require a course in personal finance to complete high school graduation. Teaching credit management falls on the parent and often times they know just as little as their kids do about managing money.

The parents are going to make the final call because they have to co-sign on the card application. It can be an opportunity for the kid to demonstrate his maturity, or it can give him or her a way to ruin his immediate credit future. As a rule, if teens don't show responsibility at school or around the house, they most likely will not handle their own credit any better.

Teens that have demonstrated responsibility might benefit even more from a credit card. Parents who okay a card are showing their trust in the kid and that can serve to reinforce positive behavior. The card can also be used as a "carrot" to motivate a less that stellar teen to straighten up his act and take his responsibilities seriously.

Our current economic crisis is due, in large part, to a large number of consumers who do not know how to handle money. Granted there have, and continue to be, predator lenders selling the idea that of course you can afford a mortgage even though you make a dollar above minimum wage. We have got to educate the kids in our schools or we will send out another generation of uneducated, and therefore irresponsible, consumers.

If you are thinking about letting your teen get a card, it would be wise to do it now. HB 627 which passed the House prohibits cards being issued to persons under 18 years old. If the Senate version passes, the law will take effect in 90 days after that passage.