Many parents may be wary of giving their teen a credit card. Teenagers have a reputation of being irresponsible. There’s a fear that the teenager will mindlessly overspend with a credit card in the wallet, ruining his or her credit and driving the whole family into debt.

However, many teenagers can be trusted to be responsible with credit cards. Giving them a credit card now will help teach them about personal finance, not to mention build credit, helping them get a car or house later.

If teenagers are irresponsible with a credit card, it’s likely because they don’t fully understand what they are or how they work. All they know is that it’s a piece of plastic easily swiped for purchases. Cash doesn’t pass through their hand.

The best way to make sure your teen uses a credit card responsibly is to make sure they really understand how it works. Many parents fail to properly explain credit cards. Without proper knowledge, a teenager will easily get into financial trouble.

Explain to them that when they use a credit card at the store, the credit card company just paid for their purchase. If they bought an MP3 player for $250, they now owe the credit card company $250. At the end of the month, the bill will come, with all of the purchases.

Make sure they notice the credit card balance. Go over with them the expenses so they can see the components of the final balance. Explain to them that if they do not pay off the full balance this month, the remaining balance will multiply with interest. Sure, they can pay it off next month, but it will cost a lot more money.

This is usually a pretty sobering explanation for a teen. If a teen actually understands how credit card debt occurs and the consequences it has on their bank account and credit history, they’ll likely be much more prudent with how they spend.

Make sure your teen also understands what the minimum balance is. This is the minimum payment they can make. Paying the minimum balance will help avoid some financial penalties, but the remainder will still continue to gain interest that they will need to pay off.

If you explain to your teen that a $20 debt can quickly become a $200 debt, they’ll probably think twice about spending. Most teens won’t like the idea of paying $200 in the end for a music album.

While you cover most of your child’s expenses, having your teen pay off their credit card balance from their own account will be much more educational, and they’ll likely use their card much more responsibly. Giving your teen a credit card is a great opportunity for teaching them how to manage money and use credit responsibly. However, make sure they really understand how a credit card works to avoid getting into trouble.

 Author Sam Jones is often asked for advice about instant decision credit cards. He suggests uSwitch comparison website is the best place to do credit card comparisons and find the best  credit card deals

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