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Debating Credit vs. Debit for Teenagers

Why do Teenagers Need Plastic?

As your children grow older, there might come a point when it becomes really inconvenient for them to pay for everything with cash. Sure, paying with cash means that they can’t spend more than they own and they see the clear connection between buying more stuff and having less money. But, it also means that you need to find the right change for them to buy their bus ticket or pay for their lunch, which isn’t always so easy.

Older teens also start to carry around more cash, either from a bigger allowance or a part-time job. Carrying a large number of dollars bill can be both awkward and dangerous; you don’t want your teen attracting attention by flashing their cash. Of course, once you choose to move to plastic, you’ll have to choose between credit cards vs. debit cards.

How is a Debit Card Similar to a Credit Card?

Before we discuss how a debit card differs from a credit card, remember that both are different from cash. A debit card is like a credit card in that it seems bottomless to many teens. It’s hard for them to see the connection between the things they buy and the money they’re spending. At least with a debit card that’s linked to a checking account or a prepaid debit card, your teen will run out of money in the account if they overspend, reinforcing the link between plastic and cash. This is one of the ways that a debit card differs from a credit card. It’s harder to teach your kids the connection between credit and cash, especially if you are the one who is paying the bill.

Are Debit Cards Safer than Credit Cards for Teens?

If you give your teen a pre-paid debit card or one linked to a checking account, you might feel that debit cards are safer than credit cards because your teen will have to stop spending when he/she runs out of money. But, regarding identity theft and credit card fraud, credit cards are actually safer as they usually have better consumer protection than debit cards. If someone steals the card, then the money that needs to be recovered belongs to the card issuer and the merchants, not you. With both debit cards and credit cards, your teen will have to learn to be responsible for keeping their card safe.

Credit Cards Teach Financial Skills

Another way that a debit card differs from a credit card is that credit cards carry annual fees and interest rates if you don’t pay off your bill. This might seem like a good reason to give your teen a debit card so that you won’t have to pay the costs or risk your teen overdrawing the card. However, your kids have to learn financial life skills at some point. Giving your daughter or son a credit card is a prime opportunity to teach them the importance of paying off a bill in full each month before they can run up a huge debt. Remember, that if he/she overdraws a debit card, there’ll also be a hefty fee to pay.

Build Credit History Early

While you debate credit cards vs debit cards, remember that giving your older teen a credit card that is linked to your account is a great way for him/her to start building credit. Although a debit card is similar to a credit card in many ways, debit cards don’t report to the credit bureaus. By adding your teen as an authorised user on your credit card account, your child can start building his/her credit history while you’re still able to educate them about budgeting and restraint.

The Convenience of Credit

Another way that a debit card is similar to a credit card is that both types of plastic are more convenient for the child to carry than wads of cash. Every parent wants to feel reassured that their child won’t be stuck in an emergency without any way to get home or get to safety. A prepaid debit card doesn’t let your teenager exceed the card limit, but it carries the risk that your teen could spend it all on luxuries and then be without the fare for a cab home. The flexibility of a credit card can be dangerous for overspending, but at least you know that your child always has funds to pay for an emergency.

Credit Cards vs. Debit Cards: Conclusion

The real deciding factor is your teen. If your teen is responsible about money and isn’t the type to easily lose or misplace their card, you might choose to get them a credit card so they can start building credit history and learning to manage credit. On the other hand, a younger teen could be better off with a debit card to help them learn that when they buy with plastic, they are still spending real money.

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