While giving a teen a credit card to go shopping this back-to-school season may seem like a bad idea, MarketWatch reports that under new consumer protection laws, it might be a good opportunity to encourage financial responsibility. The Credit Card Accountability, Responsibility and Disclosure Act of 2009 only allows teens under the age of 21 to apply for cards with the consent of a parent or guardian if they do not have the financial means to own one. By doing so, however, parents can teach money management skills to help their children avoid credit card debt in the future.
Parents also have access to the credit card account they co-sign for, giving them the ability to monitor all activity on the account. This can prevent credit card debt that can cause long-term credit score damage.
For parents who are not ready to hand their kids their own lines of credit, MarketWatch reminds consumers that prepaid cards and debit cards are still options. Debit card holders can now opt-in to eliminate overdraft fees in exchange for denying transactions that threaten to go over the set limit.
Credit cards, debit cards and prepaid cards all encourage financial responsibility and teach the importance of managing credit card debt.