Teaching Kids Credit Card Management

May 21st, 2009

teencardHow do you teach your teens credit card management?  According to most experts, the best way is to get them on it early via prepaid credit cards.

Prepaid credit cards work much like regular credit cards, allowing you to shop without cash, most anywhere you go.  Unlike regular credit cards, though, you can set the spending limit depending on how much funds you decide to put into it.  Whether it’s $100, $200 or $500, the prepaid credit card holder gets to charge only that and no more.

Many issuers allow credit card holders to apply for prepaid credit card extensions to their main account.  That means a parent can easily ask for prepaid credit cards issued to their children, which they can then use to give their kids allowance.  Some prepaid credit cards, such as those from Discover, are also enrolled in the rewards program (among other benefits), which means the children are able to make full use of features regular credit cards come with.

How exactly will this help teach kids credit card management, though?

1. Kids are exposed to responsible use of the card, forced to keep spending to within their “credit limits”.

2. With monthly statements, parents can get together with their kids to review their spending and talk about potential problems.

3. It helps educate them about what a credit card is about – a tool of convenience, not an avenue for unlimited spending.

4. It helps give them an idea of how to maximize rewards programs and other credit card benefits

noel Posted in Credit Card Guides, Student Credit Cards

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