Although you might think that why would a child ever need a credit card? The use of credit cards has become so extensive and compulsory in many cases that even children today require one definitely.

Credit cards are extremely helpful for children who are traveling abroad or even locally with school or a youth group. Your kids won’t be renting cars, but they will be eating and almost every fast food chain now accepts them. You can also give it to your child to use in case of emergencies and it is never too early to start teaching your kid some financial responsibility.

Obviously minors cannot have their “own” credit cards. Credit cards are issued only after of enter the legal age of acceptance of contracts, and so minors aren’t allowed to enter into legally binding contracts. Therefore, a minor’s credit card has to be attached to a parent or guardian’s account. But only you can decide what’s best for your child and if this is something you’ve been considering, then here are some options to consider.

Options to consider

Secondary cardholder

It is quite easy to listing a minor as a secondary cardholder. Only the creditworthiness of the primary account holder matters and thus applications and credit history checks aren’t required. A secondary card may have a different account number, thus making it easier to track expenditures or to cancel if it’s ever lost or stolen.

But on the downside, you should be careful as the primary account holder assumes full responsibility for making all payments. In case of any problems, the primary account holder’s credit history is affected.

Debit cards

This is a good option for kids as the bad credit risk factor is less with debit cards. These are just like credit cards but there’s one big difference: no credit’s involved. Debit cards are linked to bank accounts and as purchases are made, funds are immediately withdrawn.

But the problem with debit cards is that you may not know when your child makes the purchases and you’ll be left with a depleted bank account. So it is better to find a bank that offers youth accounts. This will enable your child to only use the debit card as long as there is money in his/her account. If spending is managed, youth debit cards are great for teaching children that they have to earn money before they can spend it!

Charge cards

A charge card is better than a credit card as the interest does not accumulate when you use this card. The balance must be paid in full at the end of each billing cycle. The minor is considered a secondary cardholder in this case too. But it is a good way to stress the importance of managing your spending, as you can’t carry a balance with a charge card.

Prepaid cards

Prepaid cards can be used for making purchases anywhere the other major credit cards are accepted. These cards require you to load money and as long as the money’s available, they can also be used at ATMs for cash withdrawals. When you run out of funds, all you have to do is reload!

Secured cards

This is similar to a debit card as the user can only make purchases as long as the card’s funded, but the look is more similar to credit cards. You are required to make deposits to the institutions that issue the card. Secured cards are a good way to establish credit history especially for minors. And from a parent’s point of view, it’s a good alternative to co-signing.

To co-sign or not to co-sign

The decision regarding whether to co-sign or not depends entirely on the parents. Once your children turn 18, they can apply for their own credit card. But if they don’t have a credit history, they won’t be approved without a co-signer.

By co-signing, the parents assume responsibility for making payments in case their child is unable to do so. So if your adult child doesn’t have a job, you’ll be paying the bills. The worst thing is that your credit rating will be affected if the bills are not paid in time. Therefore before co-signing, it is better to have a session with your child in order to educate him/her about the consequences of not paying the bills in time and then monitoring the payments regularly in order to save yourself and your child from bad credit.

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