Credit cards offer a good way to build credit. This is especially true for teens with low incomes or limited cash. Credit cards allow teens to build credit and receive rewards when they spend.
How to Get a Teenage Credit Card
When you're a teenager, it can be hard to know where to start when it comes to financial responsibility. You can give your teen the tools he or she needs to build credit when they are older by laying the groundwork early.
Step 1: Open an account for your teenager
Open a bank account, use it for some time before you get a credit cards and they will learn how to budget, pay bills on-time and avoid debt. Many banks provide teen-friendly services, including a teen debit card for free and online banking.
Explain to your teenager how they can open an account. Tell them what constitutes an approved application, and show them the steps for using their new card. Discuss the importance of paying on time, and how late payments can affect their credit score.
Adding your teen as an authorized account user is another great way to build your teen's credit. They can make purchases on your behalf and use your credit line. Some creditors will have age restrictions that apply to underage authorized accounts, so be sure to check before you add them.
Step 2: Have them pay their bill on time
It's a great way to show your teenager the importance of being responsible. It helps them to establish a credit record, and it shows the credit agencies that they are able pay their bills.
Step 3: Set a spending limit for the card
If you're worried your teen may go over their limit, consider giving them a credit card with a set amount they can spend. This will help them to understand what they can spend, and you'll be able to keep a closer eye on their card usage.
Step 4: Ask them about their finances
Once your teen has a credit card, it's important to stay on top of their usage and check in with them about their budget and financial goals. This allows your teen to learn from you and ask questions.
Choose the right credit card according to your teen’s goals and needs. There are also cards with additional benefits that help your teen build credit and earn airline miles or cash back.