It’s pretty common for parents to let their kids borrow their credit or debit card to buy something online, more than half of Americans with kids under 18 have done it, according to new research from CompareCards.com. And close to half of them (48%) say they regret letting them use it.
But moms and dads aren’t just handing over their plastic; their giving them cards of their own, too. Almost one in five (18%) parents of kids between eight and 14 say their child has a credit card, according to research from T. Rowe Price. And parents have good reasons for doing it, from making it easier for their kids to buy stuff when they’re apart to helping teach them financial responsibility. But before you fork over your credit card to your kid, consider these things.
- How old and mature is your child? - Just because other parents are doing it doesn’t mean you have to or should. Matt Schulz of CompareCards.com suggests the later teen years may be the most appropriate time to give your kid a credit card, but it really depends on how mature and responsible yours is. So know your kid and set expectations accordingly.
- Set spending limits - Talk about what acceptable spending is before they get the card so everyone has the same expectations, and discuss what the consequences are if they don’t follow the rules.
- Explain the pros and cons of credit - Make sure your kids and teens understand the risks and rewards of spending on credit cards. Talk about interest, late payments and credit scores and why they’re important.
Schulz advises talking to kids about money early on and giving them some responsibility as well. “Let them buy something with their own money knowing they’ll wish later that they hadn’t,” he advises. “These things give kids the chance to make mistakes when the stakes are low, so they’ll be more comfortable making smart decisions when they’re older and there’s more on the line.” Well, we can hope anyway.