Parents give their children a lot of credit.
Almost one in 10 parents (8%) with children under the age of 18 say at least one of these children has a credit card, according to a CreditCards.com report released Monday.
And other data shows that the numbers could be even higher: According to a study released in 2017 by the finance company T. Rowe Price. Almost one in five (18%) parents of children aged 8-14 say their child has a credit card, according to data released in 2017 by the finance company T. Rowe Price. It is 13% of 8-9 year olds; 18% of 10- to 12-year-olds and 19% of 13- to 14-year-olds show the data.
Other parents borrow their children card: More than half of Americans with children under 1
Worse still: Among parents who have credit cards, 21% said their children have used parents' cards without permission, the CreditCards.com survey revealed.
Of course, children with credit cards do not just go into a bank and demand a credit card – card issuers have age limits. Instead, many parents put their children on their cards as an authorized user, which means their child may use their cards, explains Kimberly Palmer, Nerd Wallet's credit card expert. Or they can just deliver their own cards to their children. (Some cards have no minimum age to add someone as an authorized user, others have it, typically about 13 or more.)
Parents give and allow children to borrow their cards for various reasons, experts say: Two do it easier for children to buy things when they are away from mother and father; so they have emergency money if they need it; to build their children's credit and to help teach them financial responsibility. But should you do that? Here's what to consider.
How old and mature is your child? Just because other parents give – or let their children borrow – credit cards at the age of eight, doesn't mean you should. "It's hard to imagine a scenario", where it makes sense to give an 8 or 9-year-old credit card, says CompareCards.com's Matt Schulz. He says the later teens are probably the most appropriate to give a child a credit card – but it all depends on how mature and responsible they are with money. "There are 16-year-olds who can be responsible enough, but many 19-year-olds are not," he says. Do things like looking at how your child handles his or her supplement, for example – does he use it quickly and then ask for more? – or how he or she behaves when you act together to help find out.
Nor is there a "one-size-fits-all response to when a child is ready to borrow a credit card," Schulz says. "There are some 10-year-olds who are mature enough to handle it, and there are 17-year-olds that you should not leave within 100 meters of your credit card. Ultimately, it is about getting to know your child and setting expectations . "
Have you set spending limits? When you give children a card, "to protect their parents' finances, it's a good idea to choose a card with a low credit limit and also to be sure to track the purchases carefully – on some cards you can sign up for purchase alerts – to make sure the child is not exceeded, "Palmer says. "It is important to agree on what is acceptable to use in advance, and then use the card to have more talks on debt, budgeting and accountability."
Determining spending rules is also important for borrowing: "Before you borrow the card, make sure your son or daughter knows what you expect from them and what the limits are, be aware of what the consequences will be if they do not live up to their end of purchase, "Schulz says. "It's important to have these conversations in advance. It can get some unpleasant talk around the dinner table, but it's far better than waiting until the disaster strikes and the tensions are at their peak."
Have you communicated benefits and disadvantages? It is important that children understand both the risk of credit cards – and the reward. Only communicate risks such as interest of interest in simple examples (say how buying a $ 100 pair of sneakers can end up costing twice as well) as well as how delayed payments and other issues on a credit card can affect credit score. Also, communicating benefits like how paying your bill in time can increase your credit score and why it is important.
And make sure before you let them borrow or get a card that you let them practice using it with you in advance. "I believe in talking to children about money really early in life and also giving some early responsibility. Let them insert the credit card into the slot. Let them buy something with their own money and know they will want later that they did not have These things allow kids to make mistakes when the effort is low, so they will be more comfortable making wise decisions when they are older, and there is more on the line, Schulz says.
Have you considered other options? When you give children a card, Schulz says that it can be good to start children with something like a prepaid card – where you put a certain amount of money on the card, and that's all the child can use – before giving them a credit card Another option is a secured credit card where you deposit a cash deposit (say $ 1000) and that is what you can charge on the account.
This story was originally published in 2017 and has been updated.