Pros & Cons of Credit Cards for Teens Under 18

Teens under 18 need parental permission to get a credit card -- often with the parent required to co-sign for the credit. For many parents, the notion of helping you get a credit card when you are under 18 is scary. Despite the risks, credit cards do offer some tangible financial advantages for young people.

Irresponsible credit use is a major problem for many adults. Therefore, some parents help young teens get low-limit credit cards to help train them in responsible use. You can often get cards with limits as low as $200 to $300. This method may seem like you are being encouraged to use a credit card. However, if you make small purchases and pay them off quickly, you are potentially learning how to avoid abusing credit cards and that these cards don't provide magic money. You have to pay balances back, with interest.

Another primary reason parents encourage teens to get a credit card is to help them establish a credit history so that they can secure car and home loans in the future. A key factor in building a good credit rating is to show responsible use of credit. A simple way to start is with small, monthly credit purchases that you pay off quickly. This contributes to building a solid payment history, which is a key factor in your credit score. A strong credit rating as a young adult boosts your ability to get good interest rates on home mortgages and car loans.

While the financial sense is often justified in parents helping you get a card as a young teen, the potential for irresponsible use exists. Parents shouldn't simply give a 13- or 14-year-old a credit card and wish her luck. Instead, parents should allow you to use the card independently, but monitor your use. You need to learn the importance of financial responsibility, but not risk making significant or consistent errors that damage instead of help your credit rating.

Negative consequences can result if you aren't prepared for responsible card use. Even reasonable responsible teens can make mistakes. If you don't pay at least your minimum-payment bill on time, for instance, you pile up late fees each month. If the point is that you learn responsibility, you should have to pay the fees yourself. Additionally, parents who simply turn teens loose with a credit card without guidance risk the development of bad lifelong borrowing habits.