Disadvantages of Teenagers Having Credit Cards

Helping your teenager get a credit card can help him establish a credit history early. Building credit early allows him to buy an automobile or finance a mortgage sooner. But while credit cards have certain advantages, these accounts involve a high level of responsibility. For this reason, it's not always advantageous for teenagers to have credit card accounts.

Lack of Budgeting and Money Managing

Using cash or writing checks for purchases can teach teenagers money management skills and help them budget their money properly. With credit cards, teens can simply pull out their plastic and make purchases without considering whether they can actually afford them. When teenagers are forced to rely on their own cash for purchases, they can develop a routine of balancing their checkbooks and waiting until they have cash before making a purchase.

High Debts

Due to the convenience of credit cards, it's easy for teenagers to accumulate high debt balances early in life. Credit cards aren't bad if teens pay off their balances in full each month. However, if unable to afford their monthly purchases, teenagers are likely to submit only the minimum payments to creditors. Heavy credit card use accompanied with minimum payments increase the odds of maxing out the credit card or keeping a balance close to the credit limit.

Lower Credit Score

While credit cards can help build a good credit history -- if used responsibility -- maxing out a credit account can have the opposite effect and actually reduce a teenager's credit score. What's more, if a teenager isn't responsible enough to make payments by the due date, this can also lead to a lower credit rating. The amount owed to creditors make up 30 percent of credit scores, and payment history makes up 35 percent of scores, according to the myFico website.

Options for Teenagers

If contemplating getting your teenager a credit card, start with a secured credit card offered by a bank or credit union. These cards are useful for teenagers because acquiring a secured card first involves opening a savings account with the bank and depositing a security deposit into this account. The amount deposited into the account equals the credit limit on the card. For example, if applying with a $500 security deposit, your teen receives a credit card with a $500 credit limit. Once a teen demonstrates that he can successfully manage a low-limit secured card, he can then apply for an unsecured card in the future.