by Amanda van der Gulik
There are a lot of different opinions out there about whether it’s wise or not to allow teenagers to have credit cards. As a homeschooling mom and entrepreneur devoted to empowering kids and teens with money smarts, I would like to share with you my personal opinion, my reasons and my advice so you’ll be able to make the best decision for your teen.
One of the great benefits of homeschooling your own children is that you can turn any experience into a long-lasting life lesson. You can use credit cards to teach your teen about money! Yup, you really can!
Let me tell you a story about myself. I grew up in Canada and when I was 21 I moved to the Netherlands. I stayed in the Netherlands for 5 years and then moved to New Zealand for 8 years before I finally returned back home to Canada. Well, after living in the Netherlands for a few years and thinking that I would never return to Canada, I decided to cancel my Canadian credit card that I had gotten when I was a teenager. I thought that was the wise thing to do…boy was I wrong!
I got my first credit when I was a teenager, about 18 years old. It was my dad’s idea. He told me, and rightly so, that by having a credit card in my own name I would be able to start building up my own good credit rating so that one day I could borrow money to buy a house, or some real estate rental properties.
I was a very good saver, and never spent money I didn’t have, so having a credit card was never a problem for me. I mainly just used it to buy gas for my car. I was only using it to build my personal credit score, and so bought my weekly gas and then made sure I paid off my full credit card bill each month before any extra interest charges were ever charged.
This worked great. So what went wrong? I left the country and cancelled my credit card!
I figured I was doing the right thing at the time because there was an annual charge for using the card, and since I wasn’t using it I didn’t want to pay for a service I no longer had any need for. I had started other credit cards in the new countries where I was living, so why would I need to keep my Canadian one right?
Well, you see what happened was that after 13 years of living outside of Canada, I decided to move back home. Now I was 34 years old and when I moved back to Canada the first thing I wanted to do was get a Canadian credit card again. I figure it would be the easiest thing in the world to do. Boy I was dead wrong!
In hind sight it was actually quite funny in an ironic way, but at the time it was just one big frustration. You see I applied for a credit card and the lady I was apply to looked me straight in the eyes and said to me, “Sorry Miss, you can’t have a credit card.”
“What?” I was shocked! “Why on earth not?”
“Ma’am,” she patiently explained, “you have no credit rating.”
Again…What? I couldn’t believe it. “Why?”
She could see my panicked face and calmly explained, “Don’t worry Ma’am, you don’t have a bad credit score, you simply don’t exist at all on the radar.”
What? How? Why? I just didn’t get it!
As it turned out I had apparently been out of the country for too long without any sort of credit building going on, and after so many years, they simply took me off their system all-together! WOW!!! I hadn’t realized that would ever happen.
And I had great credit too! Oh dear…
So I asked, “HOW can I get a credit card then?”
She told me again that I simply couldn’t, but I wouldn’t take no for an answer. I told her, “But they threw credit cards at me when I was a teenager. I didn’t have a score back then either, what’s the deal?”
She actually looked me with deadpan eyes and said, “Well, you are an adult now.”
Really? As a teenager I can get a credit card but not as an adult? What a mixed up world we live in. I honestly couldn’t believe it.
After collecting myself, I asked her again, “HOW can I get a credit card so I can start building up my score again?”
It took a long time to come up with a way, but I wasn’t going to just give up. I wanted to build my score so I could borrow money for investments, etc.
So finally she told me that I could get a ‘secured’ credit card. That’s a credit card where you put your money in it and they put your money on ‘hold’ for security. You can’t touch your money until you finally qualify for an ‘unsecured’ card after a 2 year period. YIKES!
So I put in about $500 into a new credit card. That money was put in a special holding account, and I now had a credit card I could use with a maximum balance available of $500. The exact amount that I could spend was the amount I had put into their secured account.
That way, I was really just borrowing my own money. I had to use it like a regular credit card, by paying my monthly invoice like normal (not using any of the ‘secured’ money). Basically my $500 was stuck for 2 years until I finally was able to prove that I was a good credit risk.
It was a real pain, but worth it to start building my good credit score again.
And that is why I believe that teens should get a credit card before they even become adults. It’s a good idea for them to learn how to handle a credit card before they leave your protective nest and end up destroying themselves financially because they don’t understand how credit cards and credit scores work.
What I found was that my experience could help teens avoid both bad credit and bad credit scores. Because of my personal experience of no longer even being on the credit score radar, I got to learn about ‘secured’ credit cards, and I think they are the ‘key’ to teaching your teen about money!
Instead of allowing your teen to get their own ‘unsecured’ credit card, insist that they have to begin with a ‘secured’ one; one where they put their own money in to secure it. I don’t believe in parents paying for their teens credit cards. Teens need to learn the responsibility of the spending and paying off of their own debts right from the get-go.
So help your teen start building their good credit score by getting their own ‘secured’ credit card from a younger age, and learning how to be in control of their spending before they leave your protective nest. Here are my personal suggestions for your teen:
Here’s to your teen’s financial success and great credit score!!!
Cheers…Amanda van der Gulik…Excited Life Enthusiast! ;o)
Best-selling author, Amanda van der Gulik has been homeschooling her own two children for over 11 years and is the founder of www.TeachingChildrenAboutMoney.com. Visit Amanda’s site today to grab your FREE copy of her eBook, “50 Money Making Ideas for Kids and Teens” or her “The 6 Magical Piggy Banks” cartoon.
There are a lot of different opinions out there about whether it’s wise or not to allow teenagers to have credit cards. As a homeschooling mom and entrepreneur devoted to empowering kids and teens with money smarts, I would like to share with you my personal opinion, my reasons and my advice so you’ll be able to make the best decision for your teen.
One of the great benefits of homeschooling your own children is that you can turn any experience into a long-lasting life lesson. You can use credit cards to teach your teen about money! Yup, you really can!
Let me tell you a story about myself. I grew up in Canada and when I was 21 I moved to the Netherlands. I stayed in the Netherlands for 5 years and then moved to New Zealand for 8 years before I finally returned back home to Canada. Well, after living in the Netherlands for a few years and thinking that I would never return to Canada, I decided to cancel my Canadian credit card that I had gotten when I was a teenager. I thought that was the wise thing to do…boy was I wrong!
I got my first credit when I was a teenager, about 18 years old. It was my dad’s idea. He told me, and rightly so, that by having a credit card in my own name I would be able to start building up my own good credit rating so that one day I could borrow money to buy a house, or some real estate rental properties.
I was a very good saver, and never spent money I didn’t have, so having a credit card was never a problem for me. I mainly just used it to buy gas for my car. I was only using it to build my personal credit score, and so bought my weekly gas and then made sure I paid off my full credit card bill each month before any extra interest charges were ever charged.
This worked great. So what went wrong? I left the country and cancelled my credit card!
I figured I was doing the right thing at the time because there was an annual charge for using the card, and since I wasn’t using it I didn’t want to pay for a service I no longer had any need for. I had started other credit cards in the new countries where I was living, so why would I need to keep my Canadian one right?
Well, you see what happened was that after 13 years of living outside of Canada, I decided to move back home. Now I was 34 years old and when I moved back to Canada the first thing I wanted to do was get a Canadian credit card again. I figure it would be the easiest thing in the world to do. Boy I was dead wrong!
In hind sight it was actually quite funny in an ironic way, but at the time it was just one big frustration. You see I applied for a credit card and the lady I was apply to looked me straight in the eyes and said to me, “Sorry Miss, you can’t have a credit card.”
“What?” I was shocked! “Why on earth not?”
“Ma’am,” she patiently explained, “you have no credit rating.”
Again…What? I couldn’t believe it. “Why?”
She could see my panicked face and calmly explained, “Don’t worry Ma’am, you don’t have a bad credit score, you simply don’t exist at all on the radar.”
What? How? Why? I just didn’t get it!
As it turned out I had apparently been out of the country for too long without any sort of credit building going on, and after so many years, they simply took me off their system all-together! WOW!!! I hadn’t realized that would ever happen.
And I had great credit too! Oh dear…
So I asked, “HOW can I get a credit card then?”
She told me again that I simply couldn’t, but I wouldn’t take no for an answer. I told her, “But they threw credit cards at me when I was a teenager. I didn’t have a score back then either, what’s the deal?”
She actually looked me with deadpan eyes and said, “Well, you are an adult now.”
Really? As a teenager I can get a credit card but not as an adult? What a mixed up world we live in. I honestly couldn’t believe it.
After collecting myself, I asked her again, “HOW can I get a credit card so I can start building up my score again?”
It took a long time to come up with a way, but I wasn’t going to just give up. I wanted to build my score so I could borrow money for investments, etc.
So finally she told me that I could get a ‘secured’ credit card. That’s a credit card where you put your money in it and they put your money on ‘hold’ for security. You can’t touch your money until you finally qualify for an ‘unsecured’ card after a 2 year period. YIKES!
So I put in about $500 into a new credit card. That money was put in a special holding account, and I now had a credit card I could use with a maximum balance available of $500. The exact amount that I could spend was the amount I had put into their secured account.
That way, I was really just borrowing my own money. I had to use it like a regular credit card, by paying my monthly invoice like normal (not using any of the ‘secured’ money). Basically my $500 was stuck for 2 years until I finally was able to prove that I was a good credit risk.
It was a real pain, but worth it to start building my good credit score again.
And that is why I believe that teens should get a credit card before they even become adults. It’s a good idea for them to learn how to handle a credit card before they leave your protective nest and end up destroying themselves financially because they don’t understand how credit cards and credit scores work.
What I found was that my experience could help teens avoid both bad credit and bad credit scores. Because of my personal experience of no longer even being on the credit score radar, I got to learn about ‘secured’ credit cards, and I think they are the ‘key’ to teaching your teen about money!
Instead of allowing your teen to get their own ‘unsecured’ credit card, insist that they have to begin with a ‘secured’ one; one where they put their own money in to secure it. I don’t believe in parents paying for their teens credit cards. Teens need to learn the responsibility of the spending and paying off of their own debts right from the get-go.
So help your teen start building their good credit score by getting their own ‘secured’ credit card from a younger age, and learning how to be in control of their spending before they leave your protective nest. Here are my personal suggestions for your teen:
- Have your teen apply for a ‘secured’ credit card.
- Have your teen put their own money down as the ‘security’ on the card, not yours!
- Have them start off with a small ‘security’ amount of $500 or less.
- Teach your child to pay off their monthly bills before they are charged interest.
- After 2 years of using a ‘secured’ credit card and building the responsible habit of paying off any debt owed every single month in full, then have them upgraded to an ‘unsecured’ credit card but still with a small limit of $500.
- Even if your teen doesn’t use the card, keep it active so that your teen’s good credit score that they have built up using the card will be kept active and available for when they need lending in the future, for investments, to help them grow their money.
- Make sure your teen realizes that a credit card is not free money, it’s their own money that needs to be paid back. It’s not a Christmas present. It comes with responsibilities!
- And most of all, make sure you teach your teen how to manage their money so it will work hard for them!
Here’s to your teen’s financial success and great credit score!!!
Cheers…Amanda van der Gulik…Excited Life Enthusiast! ;o)
Best-selling author, Amanda van der Gulik has been homeschooling her own two children for over 11 years and is the founder of www.TeachingChildrenAboutMoney.com. Visit Amanda’s site today to grab your FREE copy of her eBook, “50 Money Making Ideas for Kids and Teens” or her “The 6 Magical Piggy Banks” cartoon.
