Today’s fantastic family finance article is:
There’s a saying:
“You can run into debt. But you have to crawl out.”
Credit card debt is a disastrous burden we all want to nip at the bud for our kids. But a solid credit history is a benefit we want to cultivate early.
Credit cards build a credit history. But they don’t prevent debt.
Prepaid cards prevent debt. But they don’t build a credit history.
So which one is right for your inexperienced teen who’s susceptible to overspending and has no credit history?
Here’s the recipe:
- Use a prepaid card for variable discretionary expenses — everyday stuff. Load it with a weekly budget. When it’s gone, it’s gone.
- Use a credit card for fixed recurring expenses — like a monthly subscription or an auto-insurance payment. That way, the full amount due each month is never a surprise. Pay it in full. Every time.
It’s the best of both worlds for your teen.
Run a tight, debt-free ship every week.
Crawl further up the credit score charts every month.
Get tomorrow’s tip here.