While a credit card with a high spending limit seems like a bad idea to give to a teenager, giving them a credit card with some restrictions may be a good one.
What Is a Prepaid Credit Card?
A prepaid credit card is a card that functions much like a credit card but has money deposited onto the card before it can be used. In fact, it is not really a credit card at all because there is no credit that is advanced on it. You must prepay a certain amount of money and then you are able to use your card to purchase anything that you would normally be able to use a credit card for.
Why Give Your Child a Prepaid Credit Card?
Prepaid credit cards are an excellent choice for teenagers. You will discover some significant reasons to opt for this type of card for your teenager. Here are just a few:
- Teach your child about budgeting
There is no better way to teach your child about how to NOT spend beyond his or her means than with a prepaid card. Since prepaid credit cards must have money on them in order to be used, your child learns that in order to buy things, you must have money!
- Give them a sense of independence
The apron strings will need to be cut sooner or later and if you are teaching your children how to live responsibly while they are still in your care then you can rest easy when it is time for them to be on their own.
- Give them an opportunity to manage their own money
This is a great chance for your child to take charge of his or her own money and manage it. Once her or she sees how to use money wisely, there will be much less likely chance to abuse the privilege as her or she gets older.
- Establish credit
It is difficult for young people starting out to get credit. The reason for this is because they do not have credit yet established. Once they have some credit history established with a prepaid credit card, they are more able to receive consideration for credit by credit card providers.
There are several different types of prepaid cards available. Teenagers should be given the chance to establish themselves with credit in a more safe and controlled way with a prepaid credit card. Once they feel comfortable using a card this way, they will probably be able to use a real credit card more responsibly.