Teens and Credit Cards

Posted by Nick Niesen on October 29th, 2010

"Don't worry about it. I've got it this time. Next one is on you." A commonly heard statement when going out to lunch, but not so common when the words are being uttered by your 14 year old unemployed son as he whips out his credit card and places it on the lunch bill.

There appears to be a rising trend in teens using their own credit/debit cards. This trend brings two questions to my mind: Is it wise to give your teen a credit card? And, is 'everyone doing it' as your teenager says?

In a poll published in April, of 2005, Junior Achievement found that of the 1,065 9th through 12th graders that participated in the poll, 11 % of them had their own credit cards. The students ranged in age from 13 to 18+. Of that 11%, the majority of them (81.7%) stated that they paid the entire balance in full at the end of each month.

Credit card companies like Visa Buxx offers pre-paid Visa cards for teens. Visa Buxx calls this a powerful financial educational tool. It is safer than cash, convenient, and allows for parental control of their teens spending by tracking their purchases online. The teens are to benefit from Visa Buxx because it allows for independence, flexibility (every place that accepts Visa debit cards accepts Visa Buxx), it's smarter than cash because it gives teens the tools to learn financial responsibility and it is secure.

For all of the benefits mentioned above, it will cost the parent (or whomever is paying the bill) $12 to set up the account, $2.00 to fund the card (each time it is funded), 50 cents for each balance inquiry, $1.50 per ATM cash withdrawal, $5 to reissue an expired card, $3 per month for a paper statement, $2 per month inactivity fee, $20 for negative balance and $8 to close the account. There are various other fees not included here but can be found on their website. If it costs $12 to open an account, $2 to fund it and then $8 to close it (plus other fees), wouldn't it be cheaper to give your teen an extra $22?

I might be showing my age, but I'm from the old school. What is more flexible than cash? It's accepted pretty much everywhere. It's a great financial educational tool. It teaches a cold lesson in budgeting, you either have enough or you don't. It's rather difficult for a teen to walk into a mall with cash and spend more than they have. Let's face it. With Visa Buxx it may cost a parent $20 when a teen goes over their card limit. With cash, the teen will learn decision making: Do I really need it? Or, can I find a less expensive substitute?

Don't get me wrong. There are many mature and financially trustworthy teens that can responsibly use a Visa Buxx card or some other credit/debit card, its just that I would prefer to wait until my teens are gainfully employed before they use plastic