Let’s talk about credit cards for teenagers, which can be a great tool for teaching financial responsibility, as long as they’re used properly. These come in different forms, such as secured cards, student cards, and prepaid cards. Here are a few examples:
- Capital One Platinum Secured Credit Card: A secured credit card requires a cash deposit that serves as your credit line. This card is often recommended for first-time credit card users because it helps to establish credit history. It has no annual fee and reports to the three major credit bureaus.
- Discover it® Student Cash Back: This student card offers cash back on rotating categories each quarter, such as gas stations, grocery stores, restaurants, or Amazon.com, up to the quarterly maximum. It also offers a Good Grade Reward of a $20 statement credit each year your GPA is 3.0 or higher for up to the next five years. There’s no annual fee and you even get 100% U.S.-based customer service.
- Journey Student Rewards from Capital One: This card rewards responsible usage — you earn 1% cash back on all your purchases, but you get a 0.25% bonus if you pay on time, for a total of up to 1.25% cash back. Again, no annual fee and it reports to all three credit bureaus, which is great for building credit history.
- FamZoo Prepaid Card: Prepaid cards are great for teenagers because you can only spend what’s loaded onto the card. FamZoo is designed to teach kids about money management. Parents can use it to pay allowances, set budgeting goals, and even set up automatic transfers to savings. The subscription fee for the FamZoo card ranges from $2.50 to $5.99 per month depending on the plan you choose.
- Discover it® Secured Credit Card: This card allows teenagers to build credit, while also earning cash back. It offers 2% cash back at gas stations and restaurants on up to $1,000 in combined purchases each quarter and unlimited 1% cash back on all other purchases. After 8 months, Discover automatically evaluates your account for a potential upgrade to an unsecured card.
- Capital One QuicksilverOne Cash Rewards Credit Card: While this card does have a $39 annual fee, it offers 1.5% cash back on all purchases, which is a solid rate. It’s also forgiving of lower credit scores and offers an automatic credit limit increase if you make your first 5 monthly payments on time.
- Bank of America® Cash Rewards Credit Card for Students: This card offers 3% cash back in a category of your choice (from a list that includes things like gas, online shopping, dining, travel, etc.), 2% at grocery stores and wholesale clubs, and 1% on all other purchases. This card also has no annual fee.
- Chase Freedom® Student credit card: A great card for students, this one offers 1% cash back on all purchases and a $50 bonus after the first purchase is made within the first three months. Plus, students get a $20 good standing rewards bonus each year for up to 5 years.
- Greenlight Debit Card for Kids: This isn’t a credit card but a prepaid debit card for kids. Parents can control how much money their child has access to, and can also decide the specific stores where their child can spend money. It’s a great tool for teaching money management.
- Current Debit Card for Teens: Another prepaid card that gives parents control over the card’s usage. Parents can assign chores and tie them to allowances, block specific merchants, and set spending limits.
- At what age can a teenager get a credit card? Under U.S. law, one has to be at least 18 to get a credit card in their own name. However, teenagers can be added as authorized users to a parent’s credit card at any age, although the minimum age varies by credit card issuer.
- How can a teenager build credit? There are a few ways a teenager can start building credit: They can become an authorized user on a parent’s card, get a secured credit card that requires a cash deposit, or obtain a student credit card if they’re a college student. In each case, it’s important to use the credit card responsibly by making all payments on time and maintaining a low balance.
- What is a secured credit card? A secured credit card requires a cash deposit, which serves as your credit line and collateral for the account. This reduces risk for the credit card company, making it easier for someone with no credit or poor credit to get the card. This can be a good option for teens looking to build credit.
- What’s the difference between a debit card and a credit card? When you use a debit card, the money is immediately taken out of your checking account. With a credit card, the bank loans you the money with the expectation you’ll pay it back. If you don’t pay the balance in full each month, you’ll be charged interest on the remaining balance. Debit cards don’t help you build credit, but credit cards do.
- Can a teenager overspend on a credit card? Yes, just like adults, teenagers can overspend on a credit card. This is why it’s important for parents to monitor spending habits and teach financial responsibility.
- What happens if a teenager doesn’t pay off their credit card balance? If a credit card balance isn’t paid off, interest will start accruing on the remaining balance. Missing payments can lead to late fees and damage to the teenager’s credit history, which can affect their ability to get credit in the future.
- Should a teenager have a credit card? It depends on the teenager and their financial maturity. Credit cards can be a great way to teach teens about financial responsibility and help them establish credit. However, they also carry risks if not used responsibly. Parents should weigh the benefits and risks before deciding.