Credit Cards for Teens: Enabling Financial Responsibility or a Recipe for Disaster?

Hey there, parents of teenagers! Are you ready to tackle one of the most debated topics of parenting - whether to give your kids a credit card or not? It's a dilemma that has haunted parents for generations, like the age-old question of whether to give your kids a puppy or not. But unlike a furry friend, a credit card can bring both joy and sorrow, depending on how it's used. So, should you give your teenage kids a credit card? Well, hold on to your wallets, because we're about to dive into the world of teenage spending habits and find out if giving them plastic money is a good idea or not. Don't worry, we'll make it easy for you - because, let's face it, parenting is hard on its own!

Let’s talk about this disputed topic in detail and see if giving credit cards to teenagers is actually the right thing to do.

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Losing Control to Gain Better Control?

In the UAE, teens or children generally above the age of 12 years (the minimum age may vary from bank to bank) are allowed to get supplementary credit cards. These credit cards are linked to the primary holder’s account and they are responsible to pay all the debt incurred.

Now, let’s suppose you’ve given your kid a card to manage their own expenses. Once the spend rolls in, you, as a parent can use this opportunity to have an open discussion around credit card usage, preventing misuse, and building confidence in the spheres of finance management at an early life stage. While it might seem like you’re losing control at first, giving your teens access to your bank accounts via their own credit cards can instill in them a sense of responsibility and promote a healthy, trusting relationship between the two of you. All that, without compromising on the much needed supervision.

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Pros & Cons of Letting Teenagers Use Credit Cards

The issue of whether teenagers should have their own credit cards is undoubtedly a topic of debate. To help you make an informed decision, let's take a look at some of the pros and cons of this practice.

Pros  Cons 
  • Induction to Learning Financial Management - Teenagers who learn through experiences are more likely to understand spending and money better than simply by listening to someone else’s advice. By managing their credit card expenses, teens can learn the value of spending on essentials only. They will also get to learn the importance of having a good credit score, and strategies to stay out of debt.
  • Risk of Overspending & Recurring Debt - A free hand on credit cards with high limits can give teens a wrong idea about how much they can spend, which can make them prone to recurring debts. In this case, setting tight limits can help.
  • Can Help Build a Credit History - People who start using credit cards earlier in their lives have a chance to build a good credit history, which can help them get bigger credits in the future.
  • Less Appreciative of the Value of Money - When children get to tap their cards whenever they want for whatever they want, they may not understand what it takes to earn that money. As a parent, one needs to set some strict boundaries regarding the usage of the card to avoid such notions.             
  • Emergency Credit - Whether it’s an out-of-the-blue car repair, paying college dues last minute, or an unforeseen medical examination, credit cards can come to the rescue of teenagers.
  • Lack of Financial Responsibility - If your teen has poor impulse control and you see them making reckless decisions based on a hunch, it might be best to hold off on handing them a credit card for a few more years.
  • A Useful Tool for Tracking Expenses - Overseeing every purchase being made through monthly statements can give parents a good idea of where to take control of and plan in advance for an upcoming crisis.
  • Credit Score Damage - If a teenager misses a credit card payment or accumulates too much debt, it can negatively impact their credit score, which can have long-term consequences for their financial future.
  • Rewards Programs - Purchases made by your co-card holder (in this case, your teen), can help you get higher cashback rewards and better offers.
  • Potential Fraud - Teenagers may sometimes not take the necessary precautions to protect their credit card information, leaving them vulnerable to fraud and unauthorised transactions.

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4 Tips to Keep in Mind Before Handing Your Teens Credit Cards

While it may seem like a long shot for you to hand over a credit card to your teens, all it takes is a bit of mindful parenting to make your kids understand the basics of using a credit card responsibly. This includes expecting them to make mistakes and taking time out to provide solutions and help them down the correct path whenever required.

Some other useful tips that may help you draw the line around your teen’s spending are -

  1. Setting an advanced budget.
  2. Making teens understand the consequences of not paying debt (including the concept of interest rates and the impact of debts on credit scores/future financial offerings).
  3. Checking on the balance or monthly statements of the account regularly and making adjustments along the way.
  4. Letting your teens pay from their monthly allowance or charging them extra when they fail to pay the debt off on time.