Friday, July 1, 2016

Use A Hybrid Card Strategy To Help Teens Build Credit And Stay On Budget.

Credit Prepaid Card Hybrid

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:

  1. Use a prepaid card for variable discretionary expenses — everyday stuff. Load it with a weekly budget. When it’s gone, it’s gone.
  2. 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.

Win. Win.


  1. I don't believe in letting kids have any form of credit. Not that I don't trust them, but they will take it for granted. In any case, why can't they ask you to pay for things for them while they can. When they can handle their own finances they can have as many cards as they want!

    1. Well, it's hard to get credit when you don't have credit. The point here is to help your kids establish credit with things you would be paying for anyway (or they would). So, if your kiddo pays their own car insurance, perhaps they give you the $100/month from their earnings and you set up an auto-pay on a credit card in their name. If they don't pay you, they lose their right to use the car until they are caught up. They would both learn to 'handle their own finances' AND establish a credit history.