Understand Credit Card Do’s and Don’ts

Guest post by David Bakke. David Bakke lives in Atlanta, Georgia with his young son. In addition to running a reselling business online, David writes about making smart personal finance decisions on Money Crashers.

Once you have decided on a credit card for your child, teach them how to use it effectively. Here are some things that you definitely want in your game plan and some things to avoid.


  • Set Limits. Although the card will have a limit of its own, setting a lower spending limit with your child will eliminate the possibility of overdraft.
  • Decide Who Will Pay. Determine whether the parent, the child, or a combination of both will be paying the balance.
  • Sign up for Online Access. Establishing online access to the account will allow you and your child to monitor spending at any time.
  • Review Statements. The monthly statement is a powerful tool to educate your children about credit cards. Reviewing it will help your child understand the benefits of managed spending, as well as avoiding interest fees.
  • Put Your Child in Charge. Encourage your child to keep all receipts to track their spending, and explain to them that they are in charge of payment due dates. Of course, paying the balance on time will ultimately be your responsibility, but instilling a sense of ownership in your child will help them gain confidence.
  • Handle Mistakes Intelligently. If the card gets lost, the spending limit is surpassed, or there are any other errors, deal with the issue in a mature and intelligent fashion. Speak in a calm voice; discuss the error and why it occurred. Encourage your child to be honest with you at all times.


  • Forget to Follow Up. There is no point in allowing your child to have a credit card if you don’t follow up regarding successes or failures. This can lead to your child developing unhealthy spending habits.
  • Allow Unlimited Purchasing. Explain that they need your approval for any purchases over a certain dollar amount.
  • Overreact to Errors. If your child overspends, loses the card, or otherwise makes an error, overreacting to the situation will not be helpful. It will instead encourage your child to hide things from you, rather than be open and honest.
  • Let Them Make the Same Mistakes You Did. Entrusting your child with a credit card is a big step. Don’t miss out on this golden opportunity to teach them effective money management. If you have had problems in the past handling credit, be on the lookout for these issues before they arise. If you have had trouble saving, be sure to teach your kids how to save money to ensure they don’t make the same mistakes that you did.

Final Thoughts

When teaching your children about credit cards, focus on their positive aspects. They are convenient, and you can actually make money if you choose and responsibly use one of the best cash back credit cards. However, you still need to teach them the dangers of credit cards and how costly they can be if misused. If you focus on the steps to take to enjoy the benefits, you will be setting up your children for a lifetime of responsible and practical credit card usage.

What ideas do you have for teaching kids how to use credit cards? Do you have any tips to instill proper money management principles in your children?