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How to teach your teen to stay out of credit card debt

At one point in time, pretty much any college freshman walking through the halls of just about any university in Alabama could get their hands on a credit card. In fact, representatives from credit card companies often gave away free T-shirts, candy bars, or spring break rewards points to incoming freshman. Oftentimes, these cards resulted in credit card debt. Times have changed and the Credit Card Act that took effect several years ago made it more difficult for those under 21 to get a card.

Although this may be a relief to the parents of teenagers, many are wondering how to introduce their teens to the world of credit. A teen with a job may still be able to get a credit card if he or she can afford the minimum monthly payment. And some teens are able to control spending and pay their balance off monthly.

Despite the risks, some parents choose to co-sign on credit cards for their teens in order to help them build credit and teach them responsible spending habits. Another option is a secured credit card which is backed by prepaid deposits. These cards not only keep spending in check but help build the student's credit score.

A debit card is an option that helps college kids become familiar with managing money, but they don't allow the student to build credit. Prepaid debit cards are available at many pharmacies and convenience stores. Keep in mind that if they are lost or stolen they don't have the same protections as regular credit cards. Most importantly, educate your child on the risks of overspending. Use any tools possible such as email alerts and spending limits to monitor credit card or debit card use.

Source: Daily Reporter, "Credit, debit or no card at all? Parents face choice as they prepare to send kids to college," Dave Carpenter, July 11, 2012

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