When talking about credit cards for kids, there’s just so much to consider. At which age is it best to get one, how old do they have to be to get one, and do the benefits outweigh the potential perils?
Today, we’re going to talk about the best ages for credit cards for kids, the best uses, and alternatives. So let’s get right into it.
Benefits of Credit Cards for Kids
When used correctly, both debit and credit cards serve as excellent tools to teach children about money management, budgeting, spending, and building credit. Cards can be a powerful way to introduce children to handling money they can’t see and the overall value of money.
As kids grow older, they will have the benefit of this financial knowledge with them. Credit and debit cards are the practical aspects of financial knowledge that have been passed down to them. Of course, it’s imperative that adequate theoretical preparation comes first.
There’s a lot of responsibility that comes with having a credit card. And it can quickly lead into a deep hole of poor credit scores and debt. That’s why, historically, there have been no credit cards for kids.
However, in recent times, banks and financial companies have been working on credit cards tailored specifically to minors. Also, if you want your kids to experience the same financial lessons, you can still do it, just with a debit card like the BusyKid Visa® Debit Card for Kids.
Building Credit for Kids
The first thing to know about credit cards for kids is that they can’t get their own if they’re under the age of 18 or 21. However, they don’t have to be older to start building a good credit score.
Parents who want to build their child’s credit from an early age can do so by adding the kids as authorized users to their credit cards. There is no minimum age for adding children as authorized users. However, it’s always best to check with the bank or financial institution that issued the card first.
Adding a minor as an authorized user allows them to piggyback on the good credit behavior of the cardholder. Of course, poor credit card habits, like missing payments, can only hurt the minor’s credit history.
There are other alternatives to building credit in addition to this approach, but they all require your child to be over the age of 18. Some other potential alternatives include personal loans, credit-builder loans, and secured credit cards.
Good Credit-Building Habits
If you decide to authorize your kids on your credit card, there are some good practices that will help improve the overall credit score. For starters, payment history is one of the biggest credit-scoring factors. Each payment that has been completed on time is recorded on your and your child’s files and helps raise the score.
Also, it’s important to pay the full credit card balance every time. When you pay in full, you can avoid credit card debt and interest charges.
Another good practice for credit building is to avoid large balances. The credit utilization ratio is the credit card balances compared to the credit limit, and it’s a contributing factor to credit score.
If the ratio is below 30%, or ideally below 20%, it can have a positive effect on credit balance. For example, if your credit card has a limit of $1000, you and your kids should keep the balance below $200 or $300 at most, at all times.
One thing to keep in mind is that a credit card only builds credit history as long as it’s open. That’s why a lot of parents who have their children as authorized users keep their older cards open, especially if it’s the child’s first card.
So if you’ve authorized them at the age of 14, for example, by the time they’re 24, they’ll already have a 10-year history. On the other hand, those who get cards when they’re 21 will only have three years of transactions on them at the same age.
A Secured Credit Card for Kids
Since there technically aren’t credit cards for kids, you might want to consider a hybrid card like the Step Visa Card. It’s made with kids and teens in mind, and functions like a regular Visa card, with a few exceptions. It offers safety features that a debit card has but requires a sponsor.
Parents or caregivers can sponsor the Step card and get reports for the previous two years’ worth of information. As we said earlier, only those over 18 can have a credit score, but kids can start working on it before that.
Another feature that Step provides is allowing cardholders to keep their current accounts and credit card numbers when they turn 18. The cardholders will become the legal owners of their accounts, forgoing the need for a sponsor.
When to Consider Debit and Credit Cards for Kids
When it comes to figuring out the best age to get a child a card, there’s truly no one-size-fits-all solution. Every child and family is different and has different habits and priorities.
Some kids might be mature enough to have a debit card in the first grade, while others might have to wait until they’re in high school. So the final decision is up to the parents’ best judgment because they know their kids best.
With that said, many parents find that preteens tend to start being more interested in how money works, jobs, and savings. So around 12 or 13 years could be a good age to consider adding a child as an authorized user to a credit card or giving them their own debit card.
Of course, no matter the specific age, kids should have a good grasp of financial concepts before getting a card. They should also be aware of the responsibilities that come with it.
The Best Alternative to Credit Cards for Kids: Debit Cards
If you want your kids to benefit from the same financial lessons but don’t want to add them as authorized users on your credit card, it’s time to consider a debit card.
With the world becoming more cashless every day, giving children a BusyKid debit card can be an educational opportunity. They can link the card to their chore list and get paid once they perform their duties around the house. What’s more, a debit card will teach them delayed gratification and to prioritize long-term goals over short-term purchases.
Another benefit of having a debit card for kids is that it’s safer than cash. If lost, the BusyKid card can be frozen in a matter of moments. Also, a new one would be reissued as soon as possible.
What’s more, with a debit card, parents can have more insight into their kids’ spending. By accessing the account statement, parents can see a precise rundown of expenses. They can also check if there are any potentially worrying spending patterns emerging.
How to Choose a Debit Card for Kids
When it comes to debit cards for kids, parents often have one of two options. They can either help their kids open a savings or checking account or they could get them a prepaid debit card.
Most financial institutions and banks limit kids that are 12 or under to an ATM card and savings card. On the other hand, teenagers can have checking accounts with debit cards.
Many parents who want to give their kids some financial freedom land on prepaid cards instead of savings cards. They both have similar functions, with the exception that the former isn’t connected to a bank account. Only money deposited in the card can be used.
Once parents feel that their kids are more financially responsible and can handle themselves better, they choose a checking account connected to a debit card.
If you feel like your kids are up to the challenge, the BusyKid Visa® Prepaid Spend Debit Card is the right choice. Here’s why.
BusyKid Visa® Debit Card for Kids
The BusyKid Debit Card eliminates the need to have or give on-hand cash to your kids while teaching them the basics of money management. Not only that, but your little ones can practice important financial lessons from a young age.
We’ve made the card easy to use and streamlined the process of chores to spend to accommodate both kids and parents. Of course, with security being our top priority, the BusyKid card is backed by Visa® Zero Liability Policy. So in case your kids misplace or lose their cards, they can easily be blocked, while a new one is being reissued.
But that’s not all.
When you sign up for BusyKid, you can get up to five BusyKid Spend Cards, and take your pick from one of our many designs!
To Sum Up: Credit Cards for Kids
As you’ve learned by now, getting your child their own credit card is pretty much impossible. But if your goal is to help them build credit, you should consider authorization.
And if your goal is giving your kids financial freedom while helping them understand valuable life lessons, a BusyKid Debit Card could be the way to go. The process of applying for the card with BusyKid is very straightforward, as is getting the app itself.
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