If the thought of your 18-year-old on the loose with plastic in hand terrifies you, you likely share the sentiment of many parents in the same situation.
Lawmakers seem to agree as well, which is probably why the Credit CARD Act of 2009 has made it much harder for young adults age 18 to 20 to obtain their own credit card.
Under this new act, anyone under the age of 21 has to meet a few extra requirements before being granted a line of credit. They either have to either prove their income is high enough to pay off the bill or have someone over the age of 21 with sufficient income and credit co-sign (i.e. Mom or Dad).
This is where you come in. Unless you were blessed with an especially ambitious and hardworking teen, it’s doubtful your child is raking in the salary needed to qualify for his or her own card. If they want credit, you have the power to acquiesce or deny their request.
Does An 18-Year-Old Really Need a Credit Card?
You may be thinking, “Why on Earth would I let my kid have a credit card?” Everyone would be better off if your son or daughter waited until they were 21 to start using credit cards, right?
That’s actually probably true. It’s one thing if your child can qualify for a card on their own; good for them. If, however, their income does not meet the standard that creditors deem as satisfactory for handling the expense, they have no business owning one and you don’t have to let them have one.
How Do Young Adults Build Credit?
The purpose of the new laws outlined in the CARD Act is to protect this age group from overly aggressive marketing of credit cards to teens without a job to back up the subsequent bills. This scenario only leads to a mound of debt.
What, then, can a late teen or early 20s person do to establish a credit history and build a foundation for good credit in the future? Credit cards are not the only answer to this question. There are a host of other ways to build credit, such as being added as an authorized user to your credit card (without actually having access to it) or having loans for school taken out in the student’s name.
When it comes to kids and credit, it’s like the legal drinking age: It’s hoped that by waiting a few more years before giving young adults access to booze, they’ll handle the responsibility with a little more discipline and grace. Well, we all know how that goes.
Your child will eventually have to include a credit card as a part of their finances, so the sooner you can educate them about proper usage, the likelier it will be that they demonstrate self-control once the time comes. That doesn’t mean you should introduce them to credit card usage at an early age. The best you can do is lead by example and hope for the best when they turn 21.
So if you feel your son or daughter lacks the maturity and/or financial stability to handle their own card and are uncomfortable with the idea of helping them get one, don’t do it. Chances are, your kid really doesn’t deserve (or need) a credit card yet.