Should I Get an Emergency Credit Card for my Teenager?

March 12, 2014, Written By John H. Oldshue
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Once your teenager is driving, it is a good idea that he or she have access to some funds in case of an emergency. You don’t want your loved one stranded on the side of the road, unable to pay for a tank of gas or a tow truck.

Many people opt for an emergency credit card for their teenager, but this may not be the wisest choice. As a parent, you have a number of financial options. Which one you choose will depend primarily on costs and the financial responsibility of your teenager. That is a decision that only you can assess.

Prepaid Card

Obtaining a prepaid card for your teenager may be the least risky option to take from a parent’s perspective. In this case, you simply sign up for a prepaid card and deposit however much money you want. If your teenager earns an allowance, you could start putting that money onto the prepaid card. The only problem will be if your child spends through it and has no money left over for emergencies.

Reloadable prepaid cards are usually set up in a person’s name, so you will have to determine if you want it in your name or your teenager’s name. If you set it up in your name, make sure your teenager knows the PIN number in case money has to be taken out at an ATM.

Prepaid cards come with setup fees, which are usually less than $10. But then you have to be concerned about the other fees on the card, like a monthly fee, an annual fee, a cost to check your balance and a deposit fee. Read the terms closely to determine if this is an affordable option for emergencies. Ultimately, you want something with the lowest fees possible.

Bank Account with Debit Card

If you want to set up a checking account with a debit card, you could do that as well. This will be similar to a prepaid card, but it will be something you can control at your bank. Make sure that the account you set up does not allow overdrafts. Your teenager may go on a spending spree without your permission, and the last thing you want is $30+ overdraft fees for every transaction that pushes beyond the account balance.

The good thing about emergency bank accounts is that you can easily transfer money from your account if necessary. With a prepaid card, a transfer could take three days or more to complete. If your account comes with high fees though, it may not be a good fit for you. That is why you have to review the terms. Call your bank and check out the fees associated with a checking account with a debit card.

Credit Card

Your teenager may not be able to get a credit card in his name due to his age. Thus, if you want to set up a credit card, it will need to be in your name. Make sure this card has a low credit limit, and closely monitor the charges. Anything that goes wrong will affect your credit score.

Credit cards are a good choice if you don’t have the money to put into a prepaid card or checking account. However, they come with high interest rates so you’ll want to pay off your balance in full at the end of each month. This may also be a good way to begin teaching your teenager about budgeting and money management. But realize that a credit card allows your teenager to spend up to whatever credit limit is on that card. You’ll need to determine if your teenager can be trusted with that financial responsibility. If not, that financial responsibility of the card’s debt falls on your shoulders.

Secured Credit Card

Secured credit cards are a combination of prepaid cards and credit cards. You put up the money for the balance, and that acts as your credit limit. If you deposit $500, the card will have a credit limit of $500. The catch here is that you have to pay back any money you spend.

You can get your money back if you cancel your card, but until then, you will have a chance to build credit by using the card and paying back the balance. This is not as risky as regular credit cards because you do not incur any debt. You will have to pay interest and a number of other fees, so check out the total fees before you choose this option.



The information contained within this article was accurate as of March 12, 2014. For up-to-date
information on any of the terms, cards or offers mentioned above, visit the issuer's website.