Is it a good idea to give a young adult a credit card?

Dealing with money is part of the process of growing up and becoming an adult.  This includes dealing with credit cards.  There are a number of steps that will help a person get to grips with credit cards.Credit cards are very powerful financial products.  This very power can mean that they are can also easily lead a person into trouble.  This means that people who are not used to credit cards at first can find a credit card to be too easy to use when they first get a credit card and they can then end up in debt.  It does not need to be like this.

There are a number of intermediate products that can help a young adult learn about credit cards.  These include gift cards, prepaid cards and co-signatory credit cards.

Gift cards are cards that have a set balance on the card and that they can’t be topped up.  Gift cards are popular with relatives who may not feel confident enough that they will buy the right present for a relative.  The gift card will have the young adult’s name on the card and will be able to be used wherever the type of credit card can be accepted.

As well as giving the opportunity to know what a credit card feels like to use, it will also give a good indication of the ability of the young adult to manage money.  The difference between a card and cash will become obvious here as there is no physical relationship with the money.

Prepaid cards are a step up from gift cards.  These cards have a balance that can be topped up.  This means that an allowance can be added on to the prepaid credit card automatically by the parents.  This card still does not have the ability for the child to go in to debt, so it can be quite safe to be used.  This gives a good impression of how the young adult copes with spending over a long time period.

Co-signatory cards are a good next step when the person is approaching financial independence.  These cards are card where both parties guarantee the credit card debt.  For many young adults it may be the best way to get a credit card.  This also means that statements are sent to both parties and that the credit limit has to be agreed