According to Sallie Mae, about 56% of undergrad college students used credit cards in 2016 and that number continues to expand with time as cash becomes less appealing for easy and convenient transactions. It’s important to teach our teens how to build good credit by teaching them proper credit etiquette so they don’t run off with a shiny new card and end up causing headaches they’ll have to payback down the line. With these handful of simple tips both you and your teen can rest easy and know that proper use of a credit card can be a positive experience.

 

Be A Positive Example

Any opportunity to use your card responsibly in front of your teen is a great time to teach them about the reasons to use credit along with a few reasons not to. Also informing them of the difference between a debit card and credit card will be very important for them going forward. Our kids are always watching and picking up on our habits so the sooner you can teach them the right way to handle these matters with responsibility the better off they will be as they grow up. It doesn’t have to be some long winded lecture, short and sweet talks as situations arise tend to do quite well for really hitting the point home in their minds.

 

Consider Opening a Teen Checking Account

What better way to teach your teen all about things like fees, budgeting and other vital financial basics than to give them access to their own account. It opens the opportunity for them to actually feel what it’s like to manage their own budgets, see what happens when they treat that account with respect and when they don’t along with really putting them in the driver’s side of their own financial future which helps to encourage smart decisions on their part. A number of financial institutions offer teen accounts which permit both teen and parent to open an account under joint ownership. Many times there are some safeguards in place to assist in case of mishandling as well as reasonable fees and rates. Consider looking into this option with your own prefered bank to see if it’s a solid option for you and your teen.

 

Give Solid Explanations On Credit Card Use

Education comes in stages and once your teen has a basic understanding of their financial foundation it’s now time to go into more details about how to use credit cards, what to expect from using them and all the obligations which come with that. Keeping the golden rule in mind of “never charge what you can’t pay for” is extremely important to make sure they understand. They need to understand that credit cards aren’t like debit cards and each purchase made is like a small loan they’re expected to pay back over time. The longer they take to pay that loan back, the more they will pay in both money and credit score. Explain to them how interest rates work, what they are and why it’s necessary to look for the best rates possible, taking into account those typical hidden details and such so they aren’t caught off guard once “introductory rates” run out.

 

Credit Score Basics Are A Must

You need to teach your teen about the basics of their credit score so they understand what’s happening behind the scenes. They must grasp the concept of what they do now with their credit card will impact their financial future for years to come. Teach them how credit scores are calculated as well as the reasons it’s important to pay the bills on time while just starting out on the credit path. Avoiding late fees and penalties along with working toward a strong credit score is going to help your teen blossom into a financially responsible adult in the future.

 

Pick The Right Credit Card

Weighing your options when choosing a first credit card for your teen is important and should be treated as such. This is an opportunity to lead by example and teach them what to look for, which details are important as well as what can be expected before and after the credit card finally lands in their hands. There is always the option of adding your child as an authorized user to your account which means they’ll be able to use your credit line but you will still be responsible for making payments as the owner of the account. Activity on these types of arrangements will reflect on both your credit scores so keep that in mind. If you have a student in college with a job they might quality for their own card with a lower limit or possibly even a student card if they are going to school without a job, you will have to speak with a representative at your preferred bank branch to discuss details surrounding these options.

 

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