I got my first credit card at the age of 19. I secretly signed up for the card after asking my parents for assistance and being told that I “didn’t need to worry about it” just yet. With a goal of building up my credit score and eventually moving out, I thought that by simply signing up for a credit card, I’d solve my problem. But I didn’t fully understand the link between credit card use and credit history, so building up my score took me much longer than it should have. I was so scared of forgetting to make my payments and racking up debt that I never actually used my credit card.
When I moved out of my parent’s home at the age of 22, I was disappointed to find that my lack of experience using credit might actually prevent me from finding an apartment. Landlord upon landlord asked me for my credit score, which I didn’t know and didn’t know how to obtain. I was eventually able to move in with a friend while I built up my own credit history.
I used my card more frequently, signed up for additional cards, and borrowed small sums and paid them back on time, which gradually increased my credit score and made finding my next place much easier. But my learning curve wouldn’t have been so steep if I’d been introduced to the concept of credit building when I was a teenager, before I was tasked with making life-altering decisions, such as whether to move or take out a student loan.
If my parents and educators had discussed credit with me when I was a teenager and allowed me to practise responsible use, I’d have felt more confident when the time came to sign up for my own card and begin building credit on my own. This is why I believe parents should commit to teaching their teens about the role of credit in our adult lives, which may involve giving them their own card to practise on.
If you decide to give your teenager a credit card, it’s important to walk them through the role credit will play in their life. We’ve spoken to two experts about how you can help your teen get the most out of their first credit card.
What kind of credit card can you give to your teenager?
One can’t start building credit history before the age of 18. Prior to that, all your teen is eligible to hold is an alternate credit card. This means that they’ll be added as an alternate user on your credit card. While they’ll receive a card with their name on it, the statements will be delivered as a separate attachment to yours.
Karen Richardson, a financial planner with Spring Planning in Kenora, Ont., has made both of her teen boys authorized users on her credit card.
Once they had jobs for about a year and got used to using their bank card. . . I felt they must be ready for credit cards
“I want to help my kids experience things like having and using a credit card while we still have a few years left [of them] living at home,” she says. “I felt like it would be easier to teach them how to use it and pay it off when I see them every day.”
Once your teenager turns 18, there are a number of student credit cards to choose from that come with a variety of features. At this point, Richardson advises parents to sit down with their children and go through the features of the cards they’re considering to determine what they do and don’t need.
“You want to make sure it is a free credit card, [with] no fees attached,” says Richardson. “It is important once teens become 18 to get a card in their name. Then they will start to build up credit.”
Benefits and risks of giving your teenager a credit card
There are a number of benefits to teaching teenagers how to use credit before they turn 18, though.
“I think it's definitely important to teach your kids good financial practices and habits,” says Anne Arbour, a financial educator with the Credit Counselling Society. “And their credit card can be part of that when the time is right.”
“It might make sense, depending on the kid and the family and the circumstances to co-sign one of these beginner level credit cards with your teenager so they can learn while you're regularly checking in.”
However, Arbour notes that every teenager will be ready for this responsibility at a different time, and it’s important for parents to build up to credit using other teaching tools first.
“Credit by definition is using someone else’s money,” she says. “I think there’s definitely the risk of thinking that it's more money and not remembering that there needs to be a plan for how it's going to be paid.”
Richardson echoes these sentiments. She only agreed to let her teen boys practise using credit once they’d demonstrated that they were responsible enough to handle it. Her indicators included that both of them had part-time jobs and were able to set longer-term savings goals to buy the things they wanted. Otherwise, she notes, they could have gotten themselves — and her — into trouble. She also discovered other risks that she didn’t initially consider, like entering the card online to a site that may be unsafe.
“That is something that surprised me the most,” she says. “My eldest mostly uses his card for online purchases to Steam, Discord and Patreon. I had to look up all of those things to see what they were. We entered the card together and made sure we unchecked boxes that want to keep your credit card number on file or make it easy to buy more with one click.”
How do you know if your teen is ready for a credit card?
If you’re considering that a credit card might be a good teaching tool for your teenager, how do you know that they’re ready?
Richardson advises parents to look for a number of signs that their teenagers are responsibly handling the money they already have before graduating them to a credit card.
“I think it is important that they have an income before they use a credit card,” she says. “That was first. Once they had jobs for about a year and got used to using their bank card, because that was a learning curve too, I felt they must be ready for credit cards.”
Before giving your teen a credit card, they should have the card limit (at least) in their bank account
She also notes that the process doesn’t have to be identical for all children. One teen might be ready before another, and that’s perfectly normal.
“I think if kids don't have any ability to save money yet, it just isn't time. I actually delayed giving my younger son his card one year as he was spending everything he earned. Even though he was good at saving for what he wanted and waiting to buy it, he would blow every dime he had.”
How to ensure your teen doesn’t damage your credit
It’s understandably scary to trust your teen with a credit card — especially when they run the risk of damaging your credit. There are a number of safeguards you can put in place to ensure that your teenager has an educational experience with their first credit card without doing long-term damage to your financial health.
Richardson recommends giving teenagers a low credit limit to prevent them from treating their credit card like “free money.” This credit card limit, which she set at $1,500 for both boys, was separate from her own limit.
“Before giving your teen a credit card, they should have the card limit (at least) in their bank account,” she says “I didn't want the kids to think I was giving them a loan or the cards were money they could use if they ran out.”
Arbour notes that if you just don’t feel your teenager is ready for a credit card, there are other ways to help them build credit once they turn 18.
You can also choose to cosign a small loan with your teenager that you jointly pay back, or, once they’re 18, sign them up for a prepaid credit card.
“I think you really have to go back to the individual and what the need is,” says Arbour, “because there are other ways to build credit other than a credit card if that's the ultimate goal.”
Where am I now?
My parents’ choice not to discuss credit with me when I was a teenager was a product of their own upbringing. Financial literacy wasn’t something that their parents introduced to them, so they didn’t think to bring it up with me. It wasn’t just credit cards, either. I never had an allowance, never had to save for anything until I had my first job, and I was rarely privy to any conversations about our family’s financial health.
I didn’t know anything about credit until it came time to use it. The fact that this didn’t take a serious toll on my financial situation is really a product of my own privilege. I’ve been lucky enough as an adult to be employed fairly consistently with a minimal amount of debt, which has allowed me to build up a credit score that I could take to any bank. However, I understand that not everyone is so lucky.
This understanding has assured me that credit will be one of the many topics in personal finance I explore with my own kids. I believe that as a parent — especially as parents of children poised to face extremely difficult job markets and high costs of living — it will be just as important to teach them how to responsibly manage their credit as it will be to teach them to say please. Otherwise, there’s a good chance that they’ll find themselves in more trouble than they’re able to handle.