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Plastic youth: When is it too early to give a kid a credit card?

By , CardRatings contributor
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Kids and credit cards. Does that seem like a dangerous mix to you, or simply a normal part of the modern world? Parents have very different views on the subject.

An exclusive survey of 500 parents with children under the age of 12, conducted for CardRatings.com by Op4G, found that some parents believe it's best to get children in the habit of using credit while they are young, while others think it's a threshold their kids shouldn't cross until they are all grown up. Let's look at both sides of that opinion gap, along with some of the key lessons that should go along with introducing your children to using credit.

Kids, we need to talk…

The survey shows that most parents have taught their kids about credit, but just barely. Of survey respondents, 55 percent said they had explained to their kids how credit cards work, but 45 percent said they have not.

Face it -- by the time they are tall enough to see over a shop counter, your kids have probably seen you use a credit card hundreds of times. It can't hurt to explain a little background behind what you are doing.

When is the right time to let your child start using credit?

Naturally, talking about credit cards is a precursor to letting an older child use one, but parents have a wide range of opinions on when this should happen.

Only 7 percent of survey respondents think it's OK for a pre-teen to have a credit card, while at the other extreme 19 percent don't ever plan to give their child a credit card. The most popular response was that college is the right time, with 43 percent of parents saying that's when they would let their kids have access to credit. Another 30 percent think high school is the right time.

Dads seem to be an easier sell

Now, if you are a kid looking to broach this subject with your parents, you may want to wait until your father gets home. The survey suggests that dads are a softer bunch than moms when it comes to giving kids access to credit. Over a quarter of moms -- 27 percent -- don't ever plan on letting their kids have access to a credit card, whereas just 11 percent of dads feel that way.

Seven points to teach your child about using credit properly

Every child is different, so the right time to entrust your children with credit cards will depend on their intellect and their emotional maturity. How will you know when the time is right? Consider your child ready when you've had a chance to discuss the following and you believe the lessons have been understood:

  1. The concept behind how using credit cards. Explain that credit cards can be a free resource if you pay off your balances in full every month, but they can also be a very expensive way of borrowing money if you don't.
  2. How to compare credit card rates. Young people have grown up with unprecedented information resources. Show them how to use these resources to compare rates and other credit card terms.
  3. Payment tips. Take kids through your bill-paying process so they can see how you keep up with your responsibilities, and explain why making only the minimum credit card payment will greatly prolong their indebtedness.
  4. The consequences of too much debt. A survey by Fidelity found that the class of 2013 will graduate college with an average of $35,200 in debt, including loans and credit card debt. Explain that starting their careers in this kind of a hole will require years of financial sacrifices just to break even.
  5. Credit scores and their importance. Your children should understand that besides the burden of having to repay debts, too much borrowing can restrict their access to credit, insurance and even some jobs if it damages their credit scores.
  6. Security procedures. Especially when living in a communal environment like a college dorm or a shared apartment, credit cards should be kept in a secure location and never lent out. Also, credit card numbers should only be provided on reputable websites, which use proper encryption procedures.
  7. Budgeting. No one should borrow money without a plan for repaying it, so teaching budgeting should go hand-in-hand with allowing someone to use credit.

That may seem like a great deal of ground to cover, but after all, you wouldn't let your child drive a car without a thorough series of lessons. Like driving, using credit is a responsibility that is part of becoming an adult, so you should take care that your children are ready to handle that responsibility.

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