Credit cards for kids is a concept that is being embraced by more parents across the U.S. College students living away from home and teens wanting the responsibility for their own personal needs are urging parents to approve or co-sign for their own credit card. Many parents are buying into the concept - especially when they factor in the benefits of having a credit card in an emergency.

This new potential harvest of credit card users are ripe for the picking for scam artists and less than reputable credit card issuers. Parents who are considering a credit card for their son or daughter need to consider:

• Your own credit solvency and credit history will determine whether you will be approved for a card for your child. Never apply for any type of credit, if you’re already at your maximum repayment level or your credit score isn’t in the excellent range.
• Your child’s level of responsibility should be seriously examined before you commit to a credit card agreement. A child with low impulse control may cause serious long-term debt problems. Capping their ability to spend with a secured credit card or a prepaid debit card may be the way to go with a child with limited control. The card can only be used as long as there is money on deposit in an account set up specifically for this purpose.

After examining the reasons why your child should have a credit card and deciding it’s a good idea, you’ll need to evaluate the offers carefully. The fees and interest rates that typically apply to offers for students and youth can be surprisingly steep.

1. Annual Fees - With the multiptude of offers, there is no reason to accept an offer with an annual fee. This is just another way for issuers to get more of your hard earned money. Look for “No Annual Fee” offers only.
2. Disciplinary Fees - Late fees, default fees, over-the-limit fees, cash advance fees, balance transfer fees are triggered by various actions. Make sure your child understands which options are off-limits like balance transfers, cash advances or convenience checks. Also, explain the damage to credit ratings and wallets when a payment is missed or late or when the card is used beyond the allowed credit limit.
3. Introductory APR Offers - This is one way that credit card companies entice you to accept their offer. Be sure the standard APR, which kicks in after the introductory period, is reasonable. Check the monthly statement for rate hikes or fees, as card issuers can raise them at any time.
4. Reward Programs - A nice perk but definitely NOT a reason to use credit. The reward is a token when you factor in the potential cost of carrying a balance from month to month. Make sure your child understands that the reward is not an excuse to max out the card.

Teach your kid how to beat the credit card companies at their own game by paying off the balance in full and on time each month.

Posted in Credit Tips, News & Info

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