Credit cards and teens may not sound like a good fit, but giving your teen their own card can be an excellent way to learn about credit management. While teens can't get their own credit cards until they are 18, there are a number of other ways a 16-year-old can pay for purchases. Here's what you need to know.
- A UK teenager under 18 cannot get their own credit card
- However, 16-year-old can get authorised on a parent's credit card
- Teens can use other digital payment options like prepaid debit cards, debit cards, and ApplePay to make purchases if they don't want to use cash.
- Using one of the above helps to instil vital financial knowledge and practices.
Can a 16-year-old get a credit card?
The only way a 16-year-old can get a credit card, is if you (as the parent or guardian) add your child to your credit card account as an authorised user/second cardholder. As an authorised user, your teen will have their own card linked to your account and be able to make purchases. You will ultimately be responsible for these purchases if they don't pay the money back.
How to become an authorised user
Adding a teen as an authorised user is a straightforward process. Simply contact your bank or card issuer. There's no legal age requirement, but card issuers have different rules and policies for adding minors, so check the small print.
What are the pros and cons of being an authorised user at 16
- Credit management skills such as understanding credit and balance limits, making regular payments and understanding what interest is and how it works.
- Financial education around spending, the value of money and delayed gratification.
- Access to funds in an emergency, especially if they travel without you.
- A safe way for them to understand how credit cards work before having their own card.
- Teens are teens, and some may overspend and max out their card no matter what you say to them. Don't underestimate how fast teens can spend and sign up for subscriptions.
- Their spending can damage your credit rating. This is a crucial point because if spending goes unchecked, they could end up maxing out your credit; this can hurt your credit score in the future.
- It won't build their credit history. While adding them as an authorised user on your credit card can offer some benefits, it won't help your kid develop a credit history. This is because the primary cardholder is the person responsible for making repayments.
- A credit card enables them to shop where they want and buy items that you may consider to be a waste of money or inappropriate.
What are the other options for 16-year-olds?
A lot of parents might ask, should teens have a credit card? If the idea of a credit card doesn’t sit easy with you there are other methods that will help your child learn about money, credit and spending without the risks above.
Get a prepaid debit card
A prepaid teen debit card such as GoHenry can help your teen learn about saving, budgeting and responsible spending.
The pros of a prepaid debit card are that your teen can't overspend and go into debt. However, it won't teach them about credit limits and monthly payments.
That said, like a credit card, a prepaid GoHenry debit card can give your teen the freedom to spend online and in stores. It will also help them to track their spending in real time via the app. Plus, as a parent, you can monitor their spending, set limits for how much they can spend and encourage them to set up saving goals.
For this reason, prepaid debit cards are a fantastic way to safely teach teens good financial habits. So when they are ready to get a credit card, you'll be confident that they know how to be sensible with credit and spending.
Get a debit card and bank account
If your child is between the ages of 11-15, they can also open a kids bank account and get a debit card, which works very much like adult debit cards. As a parent or guardian, you have to open the account (take them with you for ID), and you also need to hold a current account with the relevant bank.
The benefit of a debit card is that it will help them to learn about money through their own experience. However, unlike a prepaid debit card, you won't be able to monitor their spending or set up spending limits. It also means they are able to buy whatever they want without the safety precautions that come with a prepaid debit card.
What's the best way to help teens understand credit?
Credit, APRs, balances and limits are all confusing terms. For this reason, make sure you teach your teen about credit card basics, such as:
- Not going over the agreed credit limit.
- Paying their bill on time each month.
- Getting cash out with a credit card has higher interest than using the card in a shop or online.
Also, remind them that while credit cards give you a line of credit with what's known as a credit limit (the highest amount you can borrow, this limit isn't free money. Everything they borrow has to be paid back with interest).
To help them get to grips with this, GoHenry's Money Missions includes bite-sized lessons designed to help teens learn about credit cards, money, and interest. It covers everything from saving and investing to responsible spending, borrowing, and more.