Teaching your children how to use credit cards
As your children enter adulthood, you’ll want them to be as clued up as possible so that they can sort out their finances responsibly. This will include teaching them all about how to correctly use credit cards.
Credit cards can be an incredibly useful tool to have in your financial arsenal but they can also be dangerous, leading to potentially large spiralling debt.
In This Guide:
- Explaining the ins and outs
- Pre-paid cards
- Credit building cards
- Adding your children to your existing card
Explaining the ins and outs
Unfortunately, the chances are slim that your children will be taught about how to use credit cards while they are at school and so it will be up to you to show them what to do.
A good place to start is by showing them one of your existing credit card statements and explaining to them everything that appears on it.
Explain to them things like balances and spending limits and the importance of keeping on top of payment due dates. Make sure they’re aware of how interest accrues and how excessive charges can be avoided by paying off your balance regularly and promptly.
A great way to get your teenager to start spending on plastic without the risk is to get them a pre-paid card. These cards work in a pretty straightforward way – you load money on and when it is all spent it can be reloaded. There is no credit involved so there’s no risk of getting in any debt or having to pay any interest.
Credit building cards
A good option for teenagers or indeed anyone looking to take out their first credit card is to go for a specialised credit building card.
These cards are designed for people with a poor or limited credit history so that they may demonstrate responsible use of credit.
Credit building cards come with relatively low spending limits and thereby prevent the holder from racking up excessive debt.
If your teenager is earning a bit of money, then it could be a good idea for them to take out a credit building card while they have cash to spare. They can then use the card to spend what they would normally, all the while staying more than capable of paying off the balance so that they can both get practise using credit and work on improving their credit rating.
To find the best deals on credit building credit cards, head over to our credit card comparison page. We’ll compare cards from market leading issuers so that you can pick the perfect card for you and start using credit right away.
Adding your children to your existing card
Another option you have to get your children to start using credit responsibly is to add them to your existing credit card as an authorised user.
If you do this, then while they will be able to spend freely on your card, you’ll be able to monitor their habits entirely and guide them accordingly.
A good way to make this arrangement work well is to impose an informal spending limit. This has the added bonus of teaching them financial discipline and responsibility – as long as they stick to the limit that is.