Good Credit Cards for a Teenager
When a teenager reaches a certain age, parents have to bite the bullet regarding credit cards. On one hand, the teenager shows maturity, but on the other, the thought of him running up charges that will take a quarter century to pay off is more than parents can bear. There must be a way for a teenager to ease into credit without going off the deep end.
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History
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Parents have had to deal with credit cards since their inception when traveling salesmen began using them on the road. In the early 1960s, bank cards gained prominence with the overwhelming popularity of American Express, MasterCard and the predecessor of VISA, BankAmericard. Since then, many different types of cards have become popular, some of which are tailor-made for teenagers.
Types
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There are three possible ways for you to approach the issue of credit cards with your teenager. Start out with a prepaid VISA or MasterCard, where a deposit is made and the "credit limit" is the amount of that deposit. Second, give your teenager access to your own credit card by having the company honor his signature. And third, you can allow him to have his own credit card which he can choose from the myriad of offers he has received.
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Features
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The prepaid VISA or MasterCard allows you to set a limit on the amount that your teenager can spend while it will expose him to monthly payments, late fees, and all else. By allowing your teenager to use your card is simple enough to do, but you are not placing a limit on how much he can charge. Therefore, you run the risk of your teenager "going crazy" with your card. And by letting him acquire his own card, you probably will not see the account activity, often until it is too late. By then, he has done irreparable damage to his credit.
Considerations
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The best defense against your teenager mishandling his credit card is educating him about basic finance. Start doing it when he will listen to you, because even preschoolers can be taught the right and wrong of spending. Start by discussing how your family spends its money and uses credit, and ask your teenager to think of ways that your system can be improved.
Warning
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Regardless of the type of credit card he has, a teenager can run into credit card problems before you know it. Unfortunately, the credit card companies encourage misuse through unwarranted increases in credit limits and checks that the teenager can cash. A teenager can quickly exceed his credit limit unless you insist on seeing monthly statements and talk with him about the power of credit.
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