How to Teach Kids About Credit Cards Without Scaring Them

Everyone knows that credit cards can be helpful when it comes to establishing a good credit history, making it easier to rent an apartment or buy a car in the future. But they can also make it too easy to spend money you don’t have. There are many ways parents can go wrong when introducing their kids to the world of credit cards.

How to Teach Kids About Credit Cards Without Scaring Them

Maybe you think your child is not ready for one yet, or maybe you know they’re mature enough but still worry about the potential downsides of introducing them as early as possible. As with most things in life, balance and moderation are key. Kids shouldn’t be scared away from credit cards forever but understood about how to use them responsibly now and in the future.

Let’s take a look at some ideas on how you can introduce your child to this adult responsibility without scaring them away from credit card usage forever…

Make It Clear That You’re Only Allowing A Credit Card For Responsible Usage

First and foremost, it’s important to make sure your child knows that you’re only allowing them to have a credit card because you trust that they will be responsible enough to pay off their monthly balance in full. If you’re not absolutely sure that your child can handle having a credit card, then it’s probably best to wait. It’s better to be too cautious than to do damage to their credit in the future.

Set Firm Rules About Usage and Responsibilities

Credit cards are a fantastic way to build your credit history. But if you don’t pay off your entire balance every month, it can actually do the opposite and hurt rather than help your credit score. Most credit card companies will let you set a reasonable monthly maximum.

So, set a reasonable monthly spending limit for your child’s card and make sure they pay off the entire monthly balance in full each month. If they don’t pay off the balance, don’t just forgive them the debt. Take it out of their savings account or add it to their bill. By making them pay for their own mistakes, they will learn.

Help Your Kid Build a Good Credit History

As we mentioned above, using a credit card and making sure you pay off the full amount each month will help your child build a good credit history. But if they don’t have a credit card, they won’t be able to make any credit history at all. This might sound like a good thing, but it isn’t. Credit agencies like to see that you can responsibly handle credit and pay it off. If they see no history at all, they might assume there’s something wrong with you and mark your credit score as “low-risk” or “unsure”.

Don’t Overload Your Kid With Information – Be Clear and Concise

You don’t need to sit your child down for a three-hour lecture about the dangers of credit cards. Instead, sit them down for a quick 10-minute chat about the importance of being responsible with credit cards and making sure they understand the following main points:

  • Credit cards are important for establishing a good credit history
  • You should only get a credit card when you are absolutely sure you can pay the bill off each month
  • Credit cards should be used for purchases that you can pay off in full each month
  • Credit cards should not be used for purchases that you can’t pay off in full each month
  • Credit cards are not a long-term source of income.

Bottom line

Credit cards are a useful tool, but they can also cause a lot of damage if they aren’t used correctly. Make sure your child understands the importance of being responsible with credit cards and setting a good credit history. By being aware of the negative effects and keeping kids informed, you can prevent them from being scared away from credit cards forever.

Kids should be aware of the dangers of credit cards, but they don’t need to be scared away from them forever. By introducing them at the right time, making sure they understand the importance of responsible usage, and keeping them informed of the main dangers, you can help your child become a responsible credit card user.