​​Dave Ramsey Thinks Parents Shouldn’t Give Their Teens Credit Cards. Here’s Why He’s Wrong

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Despite Ramsey’s advice, your teen will be better off if you add them to your credit card. 

The idea of giving a teenager a credit card is hotly debated. Anyone who’s familiar with Dave Ramsey won’t be surprised with his opinion on the subject. The finance personality recently wrote, “Your teenager does NOT need a credit card,” and many of his followers strongly agreed.

It’s understandable to be nervous about putting your teen on your credit card account. Maybe the first thing that comes to mind is getting stuck with a massive bill if they go on a spending spree. Or, you just might not be sure that using credit cards will instill the right financial values in them.

But the teen years are actually a great time to get your child started with credit, by making them an authorized user on your credit card account. With your guidance, your teen will benefit in a big way. Here’s why.

You can teach your teen how to safely use credit cards

Right now, whether your teen gets a credit card is entirely up to you. In a few short years, that won’t be the case. Once they’re an adult earning an income, they can apply for a credit card on their own.

Unfortunately, many young adults who get credit cards don’t know much about them. Most schools don’t teach how credit cards work, so people learn as they go. That can lead to some costly learning experiences. For example, here are some common mistakes your child, or anyone, could make with their first credit card:

They might only pay the minimum. This seems logical enough if you’re new to credit, and especially if you’re young and on a tight budget — why not just pay the smallest amount you can get away with? But you pay much more overall in interest because of how long it takes to pay off a credit card this way.They might forget about their bill and make a late payment. Once a credit card is 30 days or more past due, it can cause a severe drop in the cardholder’s credit score. This is something that can take years to fix.They might max out their credit card. Again, this seems logical at first. If a credit card company will give you a $5,000 credit limit, what’s wrong with spending $5,000? Young adults don’t always realize that maxing out a credit card can damage their credit score and make it hard to pay off what they owe.

This stage of life is a golden opportunity to teach your teen about credit. They’re old enough to understand credit, but you still have control over how they use it.

If you add them as an authorized user, they’ll have a card in their name that’s tied to your account. You can show them how to use it and explain the importance of only spending what they can afford to repay. You’ll also be able to monitor their spending and if necessary, lock their card from both your online account and banking app.

Starting early will help build your teen’s credit score

By giving your teen a credit card, they’ll also get a head start on building their credit score. You may be wondering — does my teen really need a credit score? Not yet, but they will. A credit score is a measure of a person’s creditworthiness, and there are all kinds of ways it affects your life. Here are a few examples:

Most rental applications require a credit check. When your teen is ready to move out and get their own place, landlords will check their credit as part of the application process.It can affect insurance rates. In most states, insurance companies can use credit scores to set rates. The cost of car insurance is over twice as much for drivers with poor credit compared to drivers with excellent credit.It’s a key part of buying a home. Mortgage lenders look at an applicant’s credit when deciding whether to approve them and when setting interest rates.Utilities companies and other service providers run credit checks. Utilities, cell phone service, and internet service are some common expenses that often require a credit check. Customers with low credit scores may need to pay a security deposit to receive service.

Simply put, a high credit score makes life easier. A low score, or no score at all, can be a hassle. Your child could have a harder time renting an apartment or getting their own cell phone plan, and they’ll possibly pay higher insurance rates.

Now, one of the most important factors in building credit is time. A credit score is based in large part on how long a person has been using credit and if they have a history of on-time payments. This normally works against young adults, who have limited credit histories, but that’s where you can help.

If you add your teen to your credit card, all the account activity gets reported to their credit file. That means if you pay the bill on time, it counts as an on-time payment for them, too. While most young adults need to start from scratch with credit, by the time your child is 18, they could already have years of credit history contributing to their score.

As a parent, you want to put your child in the best position to succeed. Giving them an early education on credit helps with that. They’ll know how to handle credit from a young age, and they’ll also build their credit score. Those are both major financial advantages they’ll take into adulthood.

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