Children and Credit Cards
Even though it is not always legal, more and more teenagers have credit cards. It seems that the charm of a credit card is irresistible but does this mean that the dangers of credit cards are nonexistent? Of course not. The fact that more and more companies offer special credit cards to teenagers does not mean that there are special protections for them, unless maybe a lower credit limit (if this can be a protection at all). What is more, credit card issuers charge fat fees and interest rates on credit cards for teenagers, so if you or your kid are not aware of the risks of credit cards, pretty soon you might have to face the ugly aspects of owning a credit card.
From a legal point of view, individuals under 18 are not allowed to have a credit card without their parent's or guardian's consent. But this does not stop youngsters from getting credit cards even at a tenderer age and their parents are the last to know. Probably it is the lure of the forbidden fruit that makes teenagers strive for credit cards, or maybe it is the desire to be like an adult? In any case, breaking the law to obtain a credit card is hardly an excuse.
One of the most important things a parent must teach his or her children about credit cards is that money doesn't grow on trees. This might sound obvious but for many people it surely isn't. Well, it gets a little bit complicated if you yourself are heavily in credit card debt. Then you certainly can't be a role model for your kids. Or maybe you can – by seeing where you end, they might have a very practical lesson about the risks of credit cards!
In any case, teaching your kid to spend wisely is very important. If you have reasons to believe that your child is unaware of the fact that using a credit card means borrowing money that must be repaid later, explain this to them. Tell them that the credit card is not free money that they can spend any way they like. You may also tell them what interest rates are and why you spend $100 and then you repay $120 or more.
One of the most unpleasant talks with kids regarding credit cards is when they fail to pay their balance and beg you to come to their rescue. For many people this is even more shocking because it is the first time they hear that their kid has a credit card! Well, it is not worse than discovering that your beloved teenager is a drug addict, for example but sometimes having to pay their bill, when you hardly make both ends meet is quite a blow for you. If your kid has obtained a credit card without your permission, then paying their debts is even more unpleasant.
If you are a co-signer on the credit card, legally you are bound to cover the balance, so you might have no other choice but pay. But when you are not a co-signer, then you might have to think a lot about what is best to do.
Opinion differs on whether you should you pay their balance or not. Many people recommend that you pay their balance once but not more. This might not be the best approach but probably it is the least painful. The decision is tough, though. If you refuse to pay the balance, your teenager instantly becomes a black sheep and his or her credit rating just collapses and it will take years for him or her to repair it. For many parents such a lesson is too harsh and that is why they choose to pay the balance and keep the kid out of trouble.
On the other hand, if you constantly pay for your kid's mistakes, he or she will know that getting into trouble is OK because Mom or Dad is the insurance policy against trouble. You do not want to allow this to happen, do you? If you pay his or her balance once, do not forget to stress as much as possible that this will hardly happen again, so now, when they know that spending a lot can hurt, maybe they should be wise enough to spend less? For many kids this works because when they get burned once, they are not that brave to be burned twice.