All credit cards in the market have common features like spending limits, APR, introductory offers, and fee structure. However, when you look out for a card for your kid, see specifically the following features –
1. Ability to track transactions online – this is a very important feature for your kids. All kids love to use computers for hours. With online tracking, they can find out easily about their spending, available balance and fees charged.
2. Rewards and promotions offered – Some card companies offer special rewards for students like free CDs, discounts on music, reward points to buy a new or used car, discounts on clothing etc. If you can see some of these rewards and promotions, it will be a great choice for your kid.
3. Linking his card to your account – You can order an additional card in the name of your kid from your credit card company. This will be useful for checking the transactions as the will appear on your statement. You can also set a limit on spending for this card. This will also be a good way of teaching you kid importance of budget.
4. There are prepaid credit cards available in the market, customized for teens. They will be just like an allowance. You can load some money on these cards and your kids get the spending power. These cards will never exceed the limits set for them, so the kids cannot make unlimited purchases using these cards. However, the fee structure of these cards needs to be examined. They may impose a fee for joining, fee for loading cash every time and annual fee. These fees will eat away the available credit limit very soon. You can check the fee structure and discuss about it with your kid so that he can also understand the importance of timely payment.
5. If you feel that the terms on these credit cards are hard, then you can think of recommending a gas station card or a local superstore card. These cards are available very easily, they are softer in fee structure and they will help your kids to build a credit score.
Why you have to do all this work for your kid? It is necessary to help your kid ‘launch’ financially. If you fail to do this, your kid may remain over-dependent on you for his financial needs in the long run.