Before you apply for any credit cards for kids, it’s important to understand how ushering your kids to life lessons early in their lives is a central part of parenting. One of the most crucial life lessons you must introduce them to is money management. Exposing your children to foundational financial knowledge and financial tools helps paint a vivid picture of what money looks like and where it comes from. As they grow older equipped with this vital life skill, they can appreciate more profound lessons about needs, wants, budgeting, saving, and overall value for money. One powerful way to teach your kids about money is by introducing them to the essentials of handling plastic money in the form of credit cards and debit cards for kids. Think of credit cards as the practical aspect of the financial knowledge you passed down to them. Naturally, therefore, it must be preceded with adequate theoretical preparation. It is imperative to discuss their savings goals, spending limits, credit habits, and responsible spending habits with your kids to familiarize them with the uncharted credit card and debit card territory well in advance. Skipping the day-to-day theory on financial literacy can land you into deep trouble because of your kid’s poor financial habits that result in abuse of credit. Credit cards for kids come with a lot of daunting responsibilities. It would be unwise to jump in there and start picking and choosing without the proper knowledge of what you are up against. To afford your kid an edge in money matters growing up, you must make financial decisions centered on their best interests. A good starting point is determining the appropriate credit card or debit card option for kids. This is one of the best financial literacy tools to assist them to start building credit and making informed financial decisions both for the present and future. So, how do you choose the right credit card for your kid? Keep scrolling as we explore the fundamentals you need to consider, the best credit cards for kids, the benefits of credit cards for kids, and whether debit cards for kids are a worthy alternative to credit cards. How To Decide If Your Child Is Ready For A Credit CardNot sure it’s time to get your kid a credit card? You are not alone, as most parents think credit cards are not a childhood thing. However, if you want to instill healthy financial habits in your child early enough, you must begin changing that narrative. Hopefully, this guide will enlighten you enough. That said, before deciding to add your kid to your account and rushing to make that call to your credit card issuer, evaluate their readiness for the heavy responsibility you are about to lay on them. The best way to approach that is by trying to answer these critical questions: Will The Child Abide By Your Requirements/Rules?Entrusting your kid with your account is a giant leap hence proper due diligence is paramount. As the person in charge of the account, you will want to set certain limitations on your kid’s credit use. Can they take it? Seek to determine whether they will reimburse you for their spending or intend to foot the bill themselves. Also important to consider is where the kid can use the card daily limit with spending and what they are permitted to purchase. This analysis should help you set the repercussions for contravening your agreement, missing a payment, late payments, or exceeding the spending limits. If your kid fails to demonstrate their readiness to adhere to your rules or breaks them given the opportunity, you might want to hold back the privilege a little longer. Are They Aware Of Credit Card Essentials?This doesn’t necessarily mean the deep-rooted stuff, no. Instead, a basic understanding of subjects surrounding credit cards should suffice. For example, testing their financial knowledge on credit limits, credit history, interest rates, online banking and credit card balances, among others, might tell you all you need to know. Moreover, evaluating their past experience handling debit cards and cash will paint a vivid picture of their readiness to take on more spending power through a credit card for kids. If they can demonstrate an understanding of the consequences of their actions on their credit as well as yours and how that matters, that might be a good sign. Can Your Credit Score Stand The Risk?If you add your child into your account as an authorized user, they will solely rely on your credit history to advance their transactions. However, this poses a significant risk to you, the account holder. Your child can potentially damage your credit score with unregulated spending habits. Poor financial habits such as excessive purchases will automatically put immense pressure on your finances. This will push up your account’s credit utilization and ultimately lead to missed payments. The aftermath of this undesirable move is a reduced credit score. A poor credit score can hinder your financial and life progress. So, before letting in your kid, you might want to consider any upcoming huge financial decisions like buying a house. How Young Is Too Young For A Kid To Have A Credit Card?Age restrictions will hinder your child from opening their own credit card account before turning 18. That means you’ll have to step in for them if you feel they are ready for the new responsibility. Adding them to your credit card account as an ‘authorized user’ is a solid way to foster fundamental financial literacy to help adequately prepare them for a sound financial future. Nonetheless, before taking the plunge, you must first determine the right age to bring your child on board. While some parents allow their elementary school-age kids to possess a credit card, others wait until they become teenagers. A recent survey by T. Rowe Price revealed that about 17% of children aged 8 to 14 possess a credit card, and that trend has been on an upward climb over the last seven years. Experts assert that it is not so much predicated on age as it is on the child’s readiness for the credit card. That means what you are teaching your child about making intelligent financial decisions takes precedence over how they are financing their purchases. The knowledge passed down to them is what ultimately matures their financial responsibility. Teach Your Children How To Use Credit CardsCredit cards are among the most valuable financial literacy tools to teach economic responsibility to kids. First, however, your kids must learn how to use the cards to have that impact. Start by shaping the narrative about credit cards when the kid is still young. Don’t let them assume it is ‘free money”“. Instead, make them understand how the card works and the potential risks of mismanaging one. Please don’t be shy to tell them the card comes with credit limits, spending limits, an activation fee, a monthly service fee, and serious consequences for late payments. Once the basics have sunk in, proceed to:
Getting Your Kids Their First Credit CardRaising your kids right requires shaping their bright future early. Introducing them to essential financial knowledge is paramount. Going a step further and teaching them good credit habits is commendable. Start by thinking about the benefits and drawbacks of getting them a credit card and the best time to maximize those benefits. If you decide it is time to get your child their first credit card for kids, you are teaching your children financial responsibility in the following ways: Building Credit EarlyA credit card is one of the most effective financial tools you can use to help your child build and establish a credible credit history and help them prepare for future financial independence. That said, you must remember that credit history is just one component of their overall credit score. Therefore, you should go a step further and teach them about other far more important components, such as payment history, which makes up about 35% of the credit score calculations. By delving into how often your kid has paid or not paid their monthly payments on time, you are essentially preventing them from ruining their credit score through irresponsible spending. In other words, as you help your child build credit early enough, make sure they understand the importance of consistently practicing good financial habits as well. Instilling Healthy HabitsAs long as your child is under your roof, they have ample opportunity to learn a lot about life from you primarily. It is also the best time to cultivate a healthy mindset by practically emphasizing healthy spending habits. Getting them a credit card for kids will allow you to educate them daily about the difference between wants and needs and the proper priority in making purchases. It might not look like it, but this is actually a great way of keeping them out of trouble. To ensure these healthy habits stick, take some time with your kid to explain all the guidelines for using your credit card account. Make them understand that they will be directly accountable for all their purchases and that you will be conducting a monthly review of their spending. Avoiding Impulse PurchasesImpulse purchases drive people to spend more than they can afford. Therefore, you are eroding their impulsive mindset by spending time alongside your child reviewing their monthly purchases. Going a step further to analyze the rationale behind each purchase helps them distinguish what things they can or cannot do without in life. Finally, with each monthly review comes an opportunity to clear your kid’s monthly charges on time and show them how that curbs high balances and late payments, which ultimately hurt their credit score. Providing A Safety NetAs much as you would love to give your child the benefit of the doubt and hope they will develop healthy money habits on their own, the childhood mistakes they make will reflect on their credit file long after they are out of your house. That’s precisely why keeping a watchful eye on their spending while still under your roof is an important safety net for them. You will essentially be safeguarding them against any potential hazards like being lured into excessive monthly charges or falling into the trap of identity theft. So, how do you get your child that first credit card? There are two options: adding them to your account as ‘authorized users’ or giving them their own credit cards. Option 1: Adding Children To Cards As Authorized UsersThis should only apply once you are double sure your child is fully ready for the responsibility of being an authorized user. An authorized user on your credit card simply means giving your child charging privileges on the card. That means the child will have access to some of the benefits you receive as the primary account holder. The authorized user’s credit history reflects on their credit profile, but you are legally responsible for the debt as the parent. That said, you are free to remove the authorized user from your card at any time. Some of the information your bank may request from you when adding an authorized user to your card includes full name, date of birth, social security number, citizenship, and mailing address, just to name a few. Once the new card for your child is processed and approved, it will be shipped to your address. While some financial institutions require a minimum age to add authorized users, some popular banks like Bank of America, Chase, and Wells Fargo have no minimum age requirements. Will Adding Your Child To Your Credit Card Help Establish Their Credit?Yes, but that comes at an extra responsibility. By making your child an authorized user, you are essentially instilling in them sound credit management skills early in their growth. This financial gift presents their credit scores with a solid head start. That said, establishing credit for your child will boil down to how the card is managed. Good payment behavior and responsible use of the secured card may positively impact your child’s credit scores. The credit score is a function of many other factors such as length of credit history, credit utilization ratio, and credit type that you must also strive to nurture for your child’s credit card use. Option 2: Giving Children Their Own Credit CardsKids are not eligible to hold a credit card under their own name until they hit the majority age. The best alternative in such a case is to get them a prepaid debit card if you want them to start money management early. With a debit card, the kid still gets to learn healthy financial habits without risking irresponsible credit habits. Debit cards for kids like Chase First Banking come with parental controls to allow you to monitor your child’s spending habits. Then, as the child manages their own money, they can easily develop budgeting skills and discover how to plan their savings goals. With that in mind, you can also combine the benefits of a regular debit card and credit card for your child. On the one hand, you help your child navigate real financial decisions, while on the other hand, you help them build their credit score as an authorized user. Once your teenager hits 18, you can help them apply for their own credit card if they have a steady job, pay stub, and established credit history. If they lack these requirements, you will have to co-sign the application for them. 5 Best Credit Cards For KidsAs you contemplate adding your kid as an authorized user or helping them get their own credit card, you will be bombarded with endless options in the marketplace. Therefore, you must keep a keen eye out for only the best credit cards for kids. Here are some of the best available options. 1. Discover It Student Cash Back Credit CardThis is a favorite among college students, mostly as it helps them build credit history effectively while developing healthy spending habits. In addition, the card comes with zero annual fees, a $0 fraud liability policy, and a 0% introductory interest rate. It also comes with several incentives, including earning a 5% cashback on daily purchases at certain places such as grocery stores, Amazon, gas stations, restaurants, and wholesale clubs. The card is widely accepted, and its cash rewards can be redeemed at any time as they never expire. What’s more, good student grades don’t go unnoticed with this credit card. Each year a student scores a GPA above 3.0, they earn a $20 statement credit to their card balance. Apply for the Discover card here. 2. GreenlightGreenlight is a debit card for kids that doubles up as an educational tool. Your child can monitor their card balance in the ‘Earn, Spend, Save, and Give’ accounts and gain critical insights on smart spending, investing, saving, as well as giving back. At only $4.99 each month, the card lets you be in charge of your kid’s financial whereabouts. For example, you get to decide the stores in which your child can spend their money. Greenlight offers a physical card as well as a virtual card option. Although, as a virtual debit card your child may be limited to using it at stores that allow contactless payments. Moreover, parental controls can be affected by ATM withdrawals. Backed by a downloadable app, you can also control the allowance management feature and pay for your kid’s automatic allowances to the card. With Greenlight, parents can pay interest on savings goals established by their children as a way to encourage the habit and help them compound their returns. 3. FamZoo Prepaid CardThis is an incredible alternative to credit cards for kids under 18 years. It is a perfect training tool for financial literacy because it gives both parents and children access to the same credit account. In addition, parents can easily teach their children about money management by linking the card to an educational banking app. You can expose your kid to critical financial lessons about earning, saving, spending, and wisely giving away money through the virtual family banking system. The system treats you as the banker and your child as the customer. By learning to apportion their money, your kid develops sound budgeting skills at a tender age. The card also comes loaded with key protection features that let you lock and unlock the card in case of suspicious activity. What’s more, you can connect chores directly to the FamZoo prepaid card. The app’s allowance features let you know once your child completes a chore and checks it off, then the app automatically direct deposits their payments to them. You can incentivize your kid’s positive money habits, such as saving and investing, through this card. For example, you can set up your own interest rate and pay interest on the child’s savings. Your child can then monitor the growth of their savings as interest accumulates. Check out the FamZoo card here. 4. GoHenryGoHenry is a powerful financial tool for kids aged between 6 and 12 and teens ages 13 to 18 years as well as their parents. You can access the account through the app set up an automated allowance payment and top up your child’s account. Then, you can set tasks for your kid to complete and earn some extra money. The app also lets you set parental controls on the child’s spending habits and provides real-time notifications and spending alerts. For only $3.99 per month, this prepaid card helps instill healthy financial habits in your child, encouraging them to set savings goals and allocate funds for the same. In terms of security, you can lock and unlock the card from the app anytime to keep your kid out of trouble. Check out the goHenry card here. 5. Journey Student Credit Card From Capital OneBesides students, this credit card for kids is open to any individual with a credit score between 580 and 699. In addition, you can expect zero annual fees and zero foreign transaction fees with this card. Starting out your journey with this credit card earns you a 1% cashback on all your eligible purchases. But, it doesn’t stop there. Paying your credit card bill on time boosts your cash rewards to 1.25% in that particular month. This is a solid way to build credit for responsible students while amassing rewards. Check out the Journey Student Credit Card here. Other Options For Credit Cards For KidsOver and above making your child an authorized user in your account, there are other credit card options you can consider, including: Secured Credit CardsSecured credit cards afford you firmer control over your kid’s spending habits. Depending on how much you deposit with your card issuer, you can restrict how much your child can charge on the card. This is an excellent tool to help build credit for your child while encouraging healthy spending. Service Station Or Gas CardAs your kid matures and takes on more responsibility, such as driving, getting them a gas credit card will help you stay ahead of their spending. Such credit cards offer great discounts on gas prices, sparing you the heat of price fluctuations. You can then go through all the purchases at the month’s end and instill financial responsibility in your child. Low-limit Credit CardThese credit cards are meant to supplement prepaid debit cards for your child who has just graduated high school. As the name states, the credit card comes with a low limit with a set maximum of about $500. It also has additional perks such as no minimum balance requirement and a low-interest rate as well as a low or zero annual fee. Emergency-use Credit CardAs the name suggests, this is a credit card for kids specifically suited for emergencies. For example, when your child relocates to a different town or heads off to college, you might want to get a family emergency card under your name but with your child as an authorized user. The child doesn’t have to use this card unless it is a genuine emergency. They can, therefore, safely tuck it away somewhere. What Are Emergency Credit Cards That Are Given To Kids Used For?Instead of escorting your child to college, on a trip, or to a different city with loads of extra cash, you would be better off stashing it all in an emergency credit card in your name. Then, should your child run out of gas in the middle of nowhere or other essentials in school or in a foreign country, they can access the emergency credit card to cater for the same. Remember to build your emergency savings to pay off the emergency credit card bill on time as you consider this option. Pros And Cons Of Getting Your Child A Credit CardMost financial literacy tools come with their ups and downs. Credit cards for kids are no different. Take a look at some of the pros and cons of getting a credit card for your child. Pros
Cons
What To Do Before Your Children Are Old Enough For A Credit CardBuilding credit for your child doesn’t have to start when they hold a credit card. Instead, you can start coaching them earlier in their growth about healthy financial habits. Many financial literacy resources are readily available and will help you to teach your kids the right financial skills to help them manage both their credit cards and bank accounts responsibly. Start by setting them up with a savings account specifically designed for children. This allows you to direct deposit the kid’s allowance directly into their account and guide them toward setting savings goals. The child can then proceed to make deposits and withdrawals from the account until such a time that they have their own steady cash flow and can graduate to a teen checking account. A checking account lets them make purchases without necessarily withdrawing money first. In other words, a savings account encourages saving for special spending, whereas a checking account teaches your child to plan out their spending habits to avoid blowing their account. Once they have fully mastered these two approaches, you can gradually take off the training wheels and introduce them to plastic payments. Start with a kids debit card and then cautiously advance to a credit card for kids. What Is The Best Reloadable Prepaid Credit Card For A Kid?Since not all credit cards are created equal, you must choose smartly for your kid. You should keep a keen eye out for a credit card with the best features, most reasonable monthly fees, and zero reload fees. The Greenlight card fits the description. This prepaid card comes at a zero card purchase fee, zero ATM fee, $0 Foreign transaction fee, contactless payments, allowance tracking, zero reload fee, and a low monthly service fee of only $4.99. The card is specifically designed for kids and offers a value second to none. To promote the financial responsibility of your child, the Greenlight card comes with incredible banking product features such as allowance management, chore management, real-time transaction notifications, direct deposits, and parent-paid interest on savings. Consider Debit Cards For Kids As An Alternative To Credit CardsA prepaid debit card for kids might come in handy when dealing with a child without a steady income, a predetermined budget, or a firm grasp of money management. Essentially, this type of card lets the child access funds loaded by their parent on the card under strict monitoring. It is a subtle way of letting the kid feel financially independent while maintaining healthy spending habits. Linking debit cards to parents’ bank accounts transfers more regulatory powers to the parent. With the Kids debit card, you can set spending limits for your child, make an automatic allowance payment, determine where they should shop, or freeze their purchasing power when they start to go overboard. In addition, with a prepaid card, your child cannot overdraw the funds hence protecting them from any future credit implications in their finances. Being in a position to control your kid’s spending habits provides you with a great window to train them in money management until you are confident they can adequately handle themselves. In other words, it is an excellent stepping stone to full-blown credit card management. Via https://arrestyourdebt.com/credit-cards-for-kids/ Via https://arrestyourdebt1.weebly.com/blog/5-best-credit-cards-for-kids-read-this-first
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Vincent BermudezHi I am Vincent Bermudez, 37 years old from California, CA, USA, working on SEO and Web Designing from the last 6 years. Here I am sharing special tips about it. |