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January 4, 2018

When Should You Add Credit Card to Your or Your Children’s Life?


The best time to get a credit card is when you don’t need one. Credit cards should be used to build your credit history, boost your credit score and help you with financial goals or emergencies. Plan your credit card to work for you to ensure you don’t end up working to pay it off.

Build credit cards into your larger financial planning. The best time to get a credit card is when you are looking to build your credit score by developing a history of responsible credit usage. Most people find it beneficial to get a credit card while in college or early in their career, when income is lower but needs are great. By utilizing credit for personal growth early in your earning potential years, you will be also be creating a strong credit history and increasing your credit score as you grow in your earning potential.

Now, keep some things in mind: Be sure you are paying your credit card in full every month, or at least paying towards your balance every month, without fail, on time. Late payments or delinquent payments do not help your credit score. In fact, they are the quickest way to tank your credit score. Then, all you’ll be left with is new debt, interest payments and bad credit.

However, if you use your credit card as a tool to build your credit while buying the things you need, your responsible actions will pay off with good credit and the ability to get better loans in the future.

When to Introduce Credit Cards to Your Children

Credit cards can be highly beneficial to growing children, not only to help with expenses but also to teach them financial responsibility while establishing their own strong financial history to enable their future lending needs.

Often, parents will utilize credit cards when their children go off to college or are out on their own for the first time. This is a good time to guide them in credit card management and teach them the skills in credit score building. However, credit cards should be introduced after your children understand and are utilizing checking and savings accounts. It’s often a good idea to introduce these initial financial tools when your child is in high school or when they are first receiving income from their first jobs.

However, if not handled responsibly, credit cards also can lead to personal finance loss and long-term debt with high interest payments. That’s why it’s crucial to be involved as your children learn about how to manage the responsibility of a credit card.

Establish your children as authorized users on your existing credit card. With this method, you will see every expense your children charge to your card. This will allow you to evaluate, in real time if you like, their choices. They have the freedom to charge what the need, and also pay the bill as you deem appropriate. And, it allows you to monitor both their spending and their payment history to ensure both are in line with the financial goals you’ve both established.

Secure a credit card with a low limit that will keep spending to a manageable amount. With a low credit limit, your child cannot charge to a level that can get them in financial trouble long-term. But, it will get them used to spending and paying for the card on a regular, consistent basis. For added security, have the bill sent to your home. This way, you can see their expenses and guide your child to make the payments when needed. You’ll see each month that they have made the correct payment and only necessary purchases.

The goal is to have credit cards financially benefit you. And, they can, as long as you don’t spend more than you can afford and pay your bills on time, every time. If used properly, credit cards established early in life for both you and your children can help build healthy credit scores, which will greatly benefit your ability to borrow money for the bigger – and the most important – purchases in life.

This article is for educational purposes only. Tulsa FCU makes no representations as to the accuracy, completeness, or specific suitability of any information presented. Information provided should not be relied on or interpreted as legal, tax or financial advice. Nor does the information directly relate to our products and/or services terms and conditions.