Teens can handle credit and debit cards with guidance. Choosing the right card depends on the teen’s age, maturity and financial skill. Financially savvy parents put a card in their children’s hands long before their 18th birthday. By the time a teen is old enough to be eligible for her own credit card, she should already know how to handle it responsibly.

Tweens (11–13)

Introduce tweens to a debit card, either prepaid or connected to a bank account (their own). One interesting variant on this idea is FamZoo, a virtual family bank: All of the family’s prepaid debit cards are connected to the parents’ card, which is the funding source for the other cards. Mom and Dad can supervise all the activity on the kids’ cards, automate pay for chores and allowances, deduct expenses, and even pay interest on savings. The system is designed to teach kids how to budget, save and use plastic responsibly.

Teens (14–17)

To teach older teens about the very real risk of running up credit card debt, many parents choose to add their child as an authorized user or joint account holder on one of the parent’s accounts (a teen under age 18 can’t get a traditional credit card in his/her own name, and a person 18 to 21 can only get one with a cosigner or verifiable income).

This establishes a credit history on the child’s credit file and puts him or her in better position to qualify for a traditional card when the time comes. As the primary account holder, the parent has full control and supervision of the account. An obvious disadvantage is that the parent is responsible for the account and any charges incurred. In fact, the damage can go in either direction: the child’s credit will suffer if the parent fails to make payments on time or carries a high balance.

The parent can add the child to an existing account or can establish a new account specially designed for teens. A great option is the DFCU Teen Visa Platinum card for 16-to-18-year-olds. The credit limit is between $250 and $1,000, based on the parent’s credit.

Young Adults (18+)

Older teens are legally allowed to obtain their own credit card (with verifiable income if under the age of 21). This is a great time to encourage the child to take on a greater level of financial responsibility. First-time credit card options are generally secured cards or student cards.

A secured card is one that sets a credit limit based on the size of a security deposit placed on the account, typically $300 to $500. The deposit is held as collateral against default. Transactions are handled in the same manner as they are on traditional accounts – the user makes purchases, the purchases show up on the statement, the user makes the required payment by the due date.

In choosing a secured card, look for one that reports to the credit bureaus as unsecured (more favorable), has a grace period for paying off purchases without incurring interest, has a low or no annual fee, and has low fees overall. Interest rates will be on the high side compared with unsecured cards, but ultimately shouldn’t matter because the goal is to teach the teen to pay the balance off every month and avoid paying interest altogether.

Few secured cards will score a high grade on every factor, but several are worth consideration. The Harley-Davidson Visa Secured Card has no annual fee and a 24+ day grace period. It reports to the credit bureaus as secured. The Capital One Secured MasterCard comes with a $29 annual fee but reports as unsecured and imposes very few additional fees. There is no foreign transaction fee, for example, so it’s great for someone who frequently travels outside the U.S. – or is spending a college semester or year abroad.

A student card is preferable to a secured card because no cash deposit is required. It’s a traditional credit card tailored to students or first-timers. That usually means a modest credit limit, but can also mean gentler treatment of people who are still learning how to handle credit responsibly and who may make a mistake now and then.

The Discover it chrome card for students is a no-annual-fee rewards card that won’t impose a penalty rate on the account if the cardholder pays late. Plus the late payment fee is forgiven on the first occurrence.  If you apply for the Discover it card and are turned down, Discover might extend an offer for its secured card instead. It’s an excellent option and one of the most favorable secured cards available.

The Capital One Journey Student Credit Card is a no-annual-fee rewards card that pays bonus rewards to cardholders who pay their bills on time.

The Bottom Line

A credit card is a great tool for teaching a teen about credit, credit cards, credit monitoring, budgeting, and money management. Even parents who haven’t handled credit cards perfectly in the past can help their children start their financial lives on the right foot. As with any skill, money management requires a great deal of practice. So encourage the teen to use and pay off the card regularly.

For any card, understand the terms, conditions, and fees before applying.

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