5 Reasons to Let Your Teen Have Their Own Credit Card This School Year

Holly Johnson

Updated On: September 30, 2022  •  4 Minute Read

Credit Cards, Student/Financial Aid

School is in session, which means most children are now fully entrenched in the daily grind. For most school-age kids, this means plenty of studying, after-school activities, sports, and social events — all important activities for kids of any age.

If you have a teenager, however, you may be starting to think about “what’s next.” College may only be a few years away, so it’s easy to wonder if your kids will be truly prepared.

This is part of the reason many parents of teens decide to add their children to their credit cards as an authorized user.

No, having a credit card won’t solve common problems most teenagers have, but it can help prepare them for adulthood and make parenting easier on your end. Here’s how:

Build Positive Financial Habits Early

Giving your teenager a credit card that you’re ultimately responsible for may sound like a recipe for disaster, but you could be doing your child a huge favor. Giving them their own card along with strict spending limits and boundaries can help them learn how to live within limits and use credit responsibly.

For example, you could add your child as an authorized user on your credit card with the condition that they repay every dollar they charge to their card. This could help them understand that the freedom credit cards provide comes with consequences if they overspend or wind up buying “stuff” they don’t really want. But it can also help them learn that, no matter what, they will ultimately wind up paying back every dollar they borrow plus interest.

They Can Learn About Credit Card Interest and Debt Early On

Speaking of interest, letting your teenagers learn how it works in real life makes a lot of sense. They can slowly ease into the consequences of credit as a teenager, whereas letting them find out how interest works as an adult can have grave — and costly — consequences.

With a line of credit, your kid can learn firsthand how easy it is to accidentally spend more than they can afford to pay back. As your child’s parent, you can use these scenarios as teaching moments — and of course you would require your kids to pay back any interest that accrues on their purchases. This may seem like a harsh way to teach them this important lesson, sometimes kids really do need to learn through their own mistakes.

Letting your kid learn about debt when they’re young might teach them that they should strive to avoid it as an adult. If you wait and let them learn about debt the hard way, they could wind up racking up a ton of debt and spending decades to pay it down.

Note: To limit your own exposure to poor spending decisions your teenager might make, most credit card issuers let you set spending limits on authorized user credit cards.

Start Building Credit History

Another benefit of adding your teenager as an authorized user is the fact that this act can help them start building a credit history. With authorized user history on their credit report, they’ll get the benefit of having your on-time payments and responsible credit usage reported to the three credit bureaus.

This can put your teenager at a real advantage when they reach college years and want to qualify for their own student credit card or apply for private student loans. With some positive credit history on their report, they’ll have a leg up in building up a healthy credit score while they’re young.

Be Prepared for an Emergency

If your kids are in a ton of after-school activities, giving them their own credit card can also give you peace of mind. If your child needs to pay for school supplies or sporting fees they forgot about, having a credit card means they’re covered whether they can get ahold of you or not.

Having their own card means they can pay for an Uber ride if they get stranded somewhere without a ride, and it also means they’ll have a form of payment that works in an emergency.

The bottom line: There are many ways having a credit card could get your child out of a bind — or even save their life.

You Can Monitor Their Spending

Finally, don’t forget how your child having their own credit card benefits you as their parent. Instead of giving them cash for supplies and spending money and never knowing where it ends up, a credit card would allow you to monitor their purchases and know exactly where their money is going.

If you agreed they could spend $100 on back-to-school clothes and they spend that money at the movies instead, you would know right away. You could also log into your credit card account to see if your child is spending money in places they aren’t supposed to be to begin with — for example, if they paid for dinner in a restaurant out of town or they spent money in a vape shop.

The Bottom Line

If you’re on the fence about giving your teenager a credit card, that’s totally understandable. After all, you don’t want your teenager to learn to use credit as a crutch — or to think credit cards are the only way to finance the things you want in life.

But since most people are going cash-free and more and more retailers are accepting credit cards, plastic really is becoming a way of life. You may be better off introducing them to the realities of credit early, while you have some control over the consequences. If you unleash your teenager into the adult world without any credit experience, the results could be disastrous.