Should you give your children credit cards?

What you need to know about helping teens get better at managing money.

children credit cards

Most people are wary of giving their teenagers and young adults debit or credit cards because they feel they aren’t well-equipped to handle the responsibility. However, Credit cards is a large part of the way consumers pay and as per a report by IAMAI-IMRB (Internet and Mobile Association of India), it has been found that over 50% of people use credit cards to pay for goods and products online.

Frankly speaking, whether it is cash or a credit card, children need to learn the value of money and who better to learn from than you?

For instance, if your child tends to spend too much money, you might find it better to give him/her a credit card with a cap on the limit to budget their expenses instead of giving them a checking/saving account with unlimited cash flow.

If you have been contemplating giving your son or daughter a credit card (or have already made up your mind), here are some reasons that you should go ahead and do it.

  1. Building CIBIL score

As you know, your CIBIL score affects your chances to get loans and avail various services from banks and other financial institutions.

To become a primary card holder, your child needs to be 18 years old. Till then you can give them an add-on card where you are the primary holder. Even if their card’s credit limit is capped by you, she/he still gets a chance to start building their CIBIL score as per use of the credit card. However, with privileges comes responsibility and you need to teach them to use the card responsibly and clear payments on time.

Related: How does your employer profile decide your loan eligibility?

  1. Using credit cards responsibly

Your children need to be taught the difference between need and want. Today you might help pay their credit card bills but later in life they need to know how to earn, save and pay their own bills. Even with just an add-on card, they can learn how to budget and take on freelance or part time-jobs to pay the credit card bills on their own. This can be extremely useful if there is an emergency and she/he does not have cash to cover a medical emergency when they are in a different city to work or study.

Related: Things to Consider Before Picking Up a Credit Card

  1. Handling Finance

Children who have been shielded from handling finances in their early teens and later years might find it difficult to handle finances when they start earning. Since they have always depended on you to pay their bills and have a “daddy/mommy will handle it” attitude, they might have issues with transitioning to financial independence. Also, you need to prepare them for every possibility, which includes your absence in the long run.

Related: Estate planning: 10 things to do before you die

  1. Parental Guidance Needed

Just because you have given your child the card doesn’t mean you cannot monitor their spending. It is important that the bills are scrutinized so you are aware of where all it has been used because misusing the card is easy. However, we would advise you to exercise caution to ensure that your child does not find your involvement overbearing. Here are some tips to master this:

Related: How to come out of credit card debt

A note of caution

Much like adults, children sometimes give in to peer-pressure, and with ready access to credit card, can tend to be frivolous in spending money. They use the credit card as an easy means of financing weekend getaways, or visits to local haunts and they unleash the power of easy money as a way to gain social standing with friends.

Thus, it is imperative that you guide them through this process without making them feel like you are not on their side. With proper guidance, even a credit card can be controlled and be used effectively.

Related: 8 financial steps to take before you have a child


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