The Best Credit Cards for Teens

Approximately 80% of college students have a credit card with an average debt of around $3,500, while 1 in 10 of these students have accrued over $7,500: teaching high school teens about responsible credit card spending is becoming painstakingly necessary. With statistics like this, the best credit cards for teens are probably “NO” credit cards.

Parents that send their son or daughter off to college, or teens directly entering the work force, without any background in responsible spending can cause some hardships and problematic accruement of debt. Obviously, the ultimate goal for any parent or guardian is to give their teens the knowledge to sensibly use a credit card and not amount any bad debt; however, the journey to obtain this goal begins with a simple one on one lesson about the topic at hand.

Many parents and guardians take out their recent credit card statement and show their teens their most recent transactions, explain the reason for their purchases, and then how they intend to pay the monthly bill in full, and on time. It is important to make teenagers understand how the penalties work for late payments, and how credit cards are not intended for short-term loans or to develop a lifestyle that they cannot afford. Surprisingly, about a third of high school seniors use a credit card, while only about 5% of teens, ages 12-18, think that credit card debt is not a problem (Teenage Research Unlimited, 2004); so the odds are in favor of the parents.

Teens embarking on their journey into financial freedom usually begin with a pre-paid debit card, or stored-value card, which are much like gift cards. Depending on the card, some vendors charge nominal fees to check balances at ATM’s, withdrawal cash, and for each transaction. Vendors such as MasterCard and Visa have introduced cards entitled PAYjr, MYPlash, Allow Card, and Visa Buxx.

These are the best credit cards for teens because their parents and themselves can view online statements, set spending limits (as it is all pre-deposited), and review purchases to exemplify good spending habits. Additionally, any authorized user can deposit money into a card’s account, including the teen’s employer, grandma, and mom and dad. Most of these cards require an activation fee, maintenance fees, deposit fees, and balance inquiry fees, however, in most cases, do not charge any transaction fees.

After a teen has fulfilled their “requirements” to graduate from a pre-paid card, some experts feel that a debit card or secured credit card is a logical next step. A debit card is linked directly to a checking account, and teens must keep track of their account balance to be sure they do not run into overdraft fees. Some banks have developed reserve accounts in the event of over drafting, in which the teen denominates an amount of money that earns a minimal amount of interest so that the bank can pull the remaining amount of required funds. Furthermore, some banks allow the requested over drafted funds be taken directly from the savings account with no additional fees; however, with any checking or savings account, the potential for insensibly onset fees is present.

A secured credit card is also one of the best credit cards for teens and can rest the worries of many parents and guardians and is a great gateway into complete credit independence. A secured credit card is directly linked to a teen’s savings account, which sets the credit limit each month to the total amount in the savings account. A secured credit card also has a safety feature built in that will automatically withdrawal payment from the savings account in the event a teenager forgets to pay the monthly bill. Furthermore, this type of card allows the teen to begin to establish credit, as well as learn the importance of paying their bill on time.

So after all of the preparation the time has come, as an actual credit card is in sight. Some parents elect to co-sign with their teen, while others make them an authorized user on their account. Whatever the final decision, either choice will mark the milestone as a pre-cursor to complete independent financial freedom.