For Children With Credit Cards, Responsibility Comes At Early Age

For Children With Credit Cards, Responsibility Comes At Early Age

The economy is on most people’s minds today. Many believe that the economy suffered from the ability of lenders to make smart loans. A part of this problem was due specifically to unsecured credit card loans. Most people understand that credit card use can be very risky. As financial problems arise, credit cards can seem like the only out. Without understanding the danger of accumulating a large amount of debt, some families max out their credit cards to the point where they can barely afford the minimum payments. At that point, any further economic downturn can send them into bankruptcy. For these reasons, concerned parents want to teach their children the importance or proper money management. This may start by asking children to pay their own way for some of their entertainment expenses, through an allowance or an after-school job. Children learn by experience that if they want to buy one important thing, then they may need to forego other unimportant purchases. Further, they learn that some particular item does not just cost a dollar amount, but costs a certain number of hours of their hard work. However, this is not enough for money management in the modern world, where some essential purchases such as a car or a home cannot be made without credit. Children need some sort of a credit card for teens to get a complete education in money management. SpendSmart’s downloadable eBook series is a great starter guide covering the best ways to teach your kids about financial responsibility.

Risk of a Credit Line

In light of all the problems adults can have with credit cards, many would consider giving a teenager a credit card an act of lunacy. They would expect that the very next event would be that the child disappears on a trip to the mall, and that sometime later in the month they would get a huge credit card bill in the mail. Of course, most teenagers are not that irresponsible; however, they will likely make mistakes as they learn all the tricks of properly managing a credit card. The good news is that a prepaid card for teens is a perfect way for them to learn proper credit management without all of the risk.

A Prepaid Card is a Full Credit Card

Some people sneer at a prepaid card and feel it is only a fake card that people with poor credit are forced to use. This is not the case. Except for the ability to incur instant debt, a prepaid card works in every way as a traditional credit card and is used by all sorts of individuals. In fact, those who practice strong money management will treat the expenditures made with a traditional credit card in the same way as they would from a prepaid card, as an immediate debit. For instance, suppose someone wants to buy stereo equipment for a $100. That person could charge a prepaid card with a $100, which would immediately debit their primary account, or they could make the purchase with a traditional credit card, which would not immediately come from the primary account. However, if that person is smart, he or she will be tracking the credit card expenditures and debiting them on a tracking spreadsheet as they go. With proper accounting, they will have the same total on their spreadsheet regardless of the type of card they use. This strategy helps avoid one of the biggest problems of having a traditional credit card: imagining that the money somehow comes from the ether, almost as if the purchase were free.

For these reasons, a prepaid card is an excellent credit card for teens, and for anyone else that wants to learn proper credit management in a safe manner.

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