How young is too young for a kid to have a credit card?

Some parents now give their elementary school-age children one. Experts say it can be a powerful tool to teach financial responsibility if they're ready for it.
Image: Credit Card
Making your kids authorized users on your credit card account can be a “useful tool” for teaching them about credit and how to use it responsibly.ChristopherBernard / Getty Images
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By Herb Weisbaum

Kids are maturing at an earlier age these days. It’s not uncommon for elementary school children to have cell phones. Some tweens and young teens, about one in six, now has a credit card. The 2019 Parents, Kids and Money Survey by T. Rowe Price shows that 17 percent of kids 8-14 years old have a credit card, up from just 4 percent in 2012. Almost as many of these kids (19 percent) have a checking account.

Obviously, these children are too young to apply for a credit card; they’ve been made an “authorized user” on their parent’s credit card account.

How these kids are paying for things is less important than what parents are teaching them about making smart money decisions.

Stuart Ritter, certified financial planner at T. Rowe Price

The idea of a child as young as 8-years-old having so much spending power in their pocket may seem absurd to some. But Stuart Ritter, a certified financial planner at T. Rowe Price, isn’t surprised or alarmed by the survey findings. He says it’s all about knowing your son or daughter and preparing them for the responsibility of having a card, if you believe they’re ready for one.

“How these kids are paying for things is less important than what parents are teaching them about making smart money decisions,” Ritter said. “You need to have a conversation with them about two things: How credit cards actually work and the priorities that drive their spending decisions.” As an authorized user, your child gets a credit card with his or her name on it, but that card is linked to your account, so you are still responsible for everything they charge on it. Whatever that authorized user does with their card can negatively impact your credit history.

“So, if they go out and rack up hundreds or thousands of dollars of debt, you're on the hook for that,” Ritter said. “So, you'll want to keep a close eye on how they're spending the money, until you get comfortable with what's going on, because of the effect it can have on you.”

We gave our sons a credit card at age 12

Ruth and Daniel Raskind, who live in the Seattle area, gave their sons, Sam and Gabriel, a cellphone when they were 10 and a credit card when they turned 12. Sam got his card before flying to San Francisco to visit a friend.

“I couldn’t see putting him on an airplane without giving him a way to finance an emergency,” Ruth told NBC News BETTER. “We figured it was so much safer to send him with a credit card rather than hundreds of dollars in cash for incidentals.”

The Raskinds trusted their kids to be responsible with their cards and made sure they understood when the card could be used.

“If it was something that we would pay for when we were there, they could use the card when we weren’t there,” Ruth said. “Our parenting philosophy is: They're kids and they're going to make mistakes, but the younger they are when they make those mistakes that they learn from, the less damaging those mistakes are.”

A 'useful tool' to teach financial responsibility

Kimberly Palmer, personal finance expert at NerdWallet, sees nothing wrong with teenagers having credit cards, if they’re ready for it.

Making your kids authorized users on your credit card account can be a “useful tool” for teaching them about credit and how to use it responsibly, as long as you explain to them “this doesn’t mean you can spend as much as you want and you have to pay it off each month,” she said.

“Credit cards can be such an incredible teaching tool for parents,” Palmer told NBC News BETTER. “Your child is likely to use a credit card when they grow up, so why not teach them how to use it now.”

Another benefit: Once your child has a credit card — even as an authorized user — they will start building their own credit history. Length of credit history is one of the five factors used to determine credit scores.

While debit cards, prepaid cards and peer-to-peer payment apps may seem like better and less risky payment options — and indeed, they may be for some kids — they don’t help build a credit history. Of course, irresponsible behavior with a credit card — overspending or not paying the bill on time — can hurt their credit history and yours.

Jennifer Olivestone Sieger, who lives in Los Angeles, made her three daughters authorized users on her credit card when they turned 13. Her daughters (now in their twenties) used their cards responsibly 95 percent of the time, she said, and they all had excellent credit ratings when they were in college.

“We told them this is not magic money that comes out of nowhere; you can’t buy everything you want,” Sieger said. “They were only allowed to use the card with our permission. They knew I looked over the bill each month and if they bought something that was not approved, they would have to pay for it.”

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The conversation: The value of money

Parents must be willing to teach their children the value of money before they allow their child to have a credit card, personal finance experts tell NBC News BETTER.

“Knowledge about the credit card, that's simple. It's all about the behaviors and habits you’re helping them develop,” said Vince Shorb, CEO of the National Financial Educators Council. “The earlier you start to develop these behaviors, that muscle memory when it comes to money, the better off your kids will be.”

Be clear about the rules: What purchases are allowed on the card, the spending limit, who pays the bill each month and what happens if they break the rules?

If you expect your child to pay for their portion of the monthly bill, make sure they understand that they'll need to do something in order to earn money.

You might say something like: “We’re going to give you an allowance for these chores. You can use that money to make purchases with your credit card. Just remember, at the end of the month, you’ll need to have enough money saved to pay for all the things you bought.”

One more tip: Closely monitor those purchases and have them involved when it comes time to pay the bill. Use any slip-ups as teachable moments to correct their spending behavior. This guidance will prepare them for when they get older and want to get their own credit card.

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