Today is
By: Ikedi Ani-okoye
Should kids have credit cards? That depends on the kids and the ability of the parents to educate them. Years ago credit card issuers began targeting college juniors and seniors offering instant approval to a group about to enter the workforce. Now there cards aimed at the high school crowd and another prepaid allowance card aimed at kids 12 and under! What’s going on? The banks want a piece of the $1.2 billion dollars that kids under 18 are spending on the internet. It’s also a great way to introduce a brand that hopefully the kid will use for life.
Credit cards for teens do create an opportunity to educate them in handling personal finance but who is going to teach them? Opening an account whenever you are 15 means you have also opened a credit history. This can be an advantage later in life, or the commencing of a ruined credit history.
The advantage of a 15 year old with their own card is through the time they graduate college, they will have a mature credit report. Assuming that the card is in adept standing and payments were produced on time, the new graduate will have a distinct advantage getting competitive interest rates whenever 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 want 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 since 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 way to ruin his immediate credit future. As a rule, if teens don’t show responsibility at school or approximately the house, they most likely will not handle their own credit any better.
Approving a card for a teen shows trust on the part of the parent and that can help the teen's sense of self pride and reinforces positive behaviour. On the other hand, a card might be held out as a reward for a teen that hasn't done that well at school or at home whenever he or she cleans up their act. Whenever the parent is strong enough to not be manipulated, the goal of getting a card can be a strong motivation to improve.
Our current economic crisis is due, in large part, to a large number of users who do not know how to handle money. Granted there have, and continue to be, predator lenders merchandising the idea that of course you can afford a mortgage even while 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 there for irresponsible, users.
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