It is very common for parents to think of their children's financial future. This I why parents save money for their children, plan their kids educational future and hope that their child succeeds in college. This is great, and these parents are showing that they care about their children's financial future. They want them to get a degree and get a good job when they are older.
It is not as common for parents to think about their children's credit history. this is a generalization, and there is surely many parents who think about their kids credit history, but there are many good intentioned and responsible parents who never give it a thought.
It is very important for a parent to teach kids about the importance of credit cards. There is a difference of opinion when this should start, but teenagers should already know the basics of how important credit is. Teenagers usually visualize themselves owning a home and buying their dream car when they are older, and they must be taught that to get these things in life, they must establish and protect their credit history.
In the old days, parents would add their kids to their credit card account and when payments were made, it would help build the kids credit history. That was stopped years ago and now a young person must get their own credit card and build their own credit history.
There are many credit cards that are easy to get and are usually tailored to those with bad credit. People with bad credit will have a difficult time getting a credit card and credit cards that are specialized for those with bad credit is an option for young people with no credit history. The bad thing about it though is that usually there are many fees that the credit card will have that normal credit cards do not have. They may have participation fees, service fees and other annual fees that are very high. Also, the interest rate will be higher than average.
Probably, the best option for a young person to build credit would be to get a secured credit card. Most of the popular banks have secured credit cards that a person can get. The card is secured with funds that a person would place in to a specialized bank account. These funds will not be able to be touched until a certain time period has past. Usually, this is at least a couple of years.
The way it works is that you deposit as much money as you want into this account. Many times, there is a minimum of at least a couple of hundred dollars. If a person deposits $200 in to this bank account, their credit card will have a $200 credit limit. If they deposit $500, they will have a $500 credit limit and so on. The bank is not worried about a person defaulting on their credit card because the funds are secured in the bank. After a certain amount of years go by, a person may withdraw their funds and the credit card will now be an unsecured credit card.
At what time is the correct age to do this though? When should a person open up a secured credit card? Many experts agree that the sooner it is the better. A good time to have this secured credit card is during college days. Experts agree that it is very wise for a parent to open up a secured credit card for their child during these years. When the young person is done with college, they will most likely have a degree, be job hunting and have a positive credit history. Of course, being responsible and making timely payments is also important and they will have to be taught the importance of this.
There are some people who do not see secured credit cards as a good option. They don't understand why someone would put $1000 into a bank account to get a credit card with a $1000 balance. It just doesn't make sense to them. Their logic of thinking is very understandable, but what they don't understand is that the person who does this is building their future. They are thinking of how they are going to benefit their life in the future by establishing superb credit.
