Thursday, January 24, 2019
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How To Choose a Credit Card for Teens?

How To Choose a Credit Card for Teens

Requirements for applying for a credit card for your child under the age of 21 cannot be alone. Your child can legally open a credit line, but needs to be accompanied. Why does your child need assistance? Because he will likely need a joint signing or proof of income.

However, if your child already has income from work, they may be able to apply and fulfill their own requirements. If he still doesn’t work, they need parents to sign with their first card.In addition, there is another option, which is registering your child as an official user on one of your credit cards. You can also open a new card to give to your teenager, and add it as a legitimate user to the account.

Other options, your child can open a secured card. This card requires you to make a deposit as an initial credit limit. Make sure the card issuer will report the card activity to the credit bureau, so your child can start building a positive credit history

You can give a secured card to your teen as an official user. This card does not charge an annual fee. In addition, this card offers 0% intro APR for the first 15 months of purchase and balance transfer (requested within the first 60 days of opening the account). After that, your APR will be a variable level, currently 14.74% – 25.74%, based on your creditworthiness and other factors, creditkarma.com reported.

Before choosing a card for your child, you need to know how to choose a credit card that is suitable for your child.

1. You Need To Prepare Your Teenager First
You might find it hard to expect your teenagers to make smart decisions about credit if they don’t understand how it works. Cristina Guglielmetti, CFP® and president of Future Perfect Planning, as quoted by Kali Hawlk at creditkarma.com, suggest that you make sure you have discussed the basics of credit cards with your child.
Important topics discussed are as below:
• How credit works and why it is different from cash.
• What are the interest costs and how they are accumulated.
• What should be done if your child can’t pay the bill.
• Due date and penalty for late payments.
• Who is responsible for paying bills and how to do it.
• Every expenditure limit, in terms of dollar amounts or expenditure categories.
• Risk of using a credit card.

One thing to keep in mind is that talking about credit score factors and how credit is used and payments on time are very important. Talking about credit cards for teens is the key to communication. Give them an understanding of the use of credit cards wisely. In essence, there is always communication before and as long as your child accesses his own credit card.

2. You need to be honest: Is your child ready for credit?
As parents who are experienced about credit cards, you need to look at the situation realistically: Is your teen able to handle his own credit line? Every now and then you need to train your child to learn about finance in the form of a debit card or prepaid card, including budget use. Keep an eye on developments, whether your teenagers can consistently maintain their budgets and stay within spending limits when using cards, not cash.

If your teen fails to do so, there is nothing wrong if you might ask him to help pay a fee or interest to show that his actions have financial consequences, while still allowing him to practice and learn. They are still in the stage of learning to manage finances, especially credit cards. Of course, you don’t really expect your teen to have good money management skills without having to try beforehand.

You can see and observe, if your child is constantly failing to follow the rules you apply, it can show that they cannot manage their expenses and bills. That means your teenagers are not ready and need to go back to financial basics until they are better prepared to take credit responsibilities.

3. You are advised to always review your chosen card carefully
After you decide it’s time for your child to use a credit card, the next step is to choose which card is best for your child. Here are some things to consider when you choose a card for your teenage child.

First because of cost considerations. Choose a card with no charge annual fee is better for you. You need to look carefully, especially regarding terms and conditions, including interest and other fees. If you are forced to use a card for an annual fee, calculate what you have to spend in a year so that your child’s credit card is according to its use.
Second, you must pay attention to the APR problem. Because many credit card users make a lot of mistakes in terms of APR. You need to warn your child about this problem. If necessary, you should look for a card with a low APR.

Third, you don’t need to worry about gifts when finding credit cards only for children. Conversely, the ability to look for gifts can actually encourage excessive spending and make it difficult for children to stay at their expenditure limits. What parents have to do is remind their children that no matter how much money they spend, they must keep the balance rolling 30 percent of the card limit.