The best credit cards for teens

Feb 29, 2012 at 3:00 p.m. ET

Helping your kids establish a positive credit history as teens can make them become financially independent earlier because it can help raise their credit score -- a key factor when they apply for their first car loan, apartment, credit card and mortgage.

We talked to Erik Larson, president and founder of leading consumer resource about how to help your kids establish credit and use credit cards wisely.

Start with a joint account

"Establishing your child as a joint account holder or authorized user on your credit cards can help them build a positive credit history," explains Larson. "The only catch is that you need to pay the credit card bills on time -- otherwise you could be hurting their credit history.

"Another positive is teaching your child how to use credit responsibly before they get their first credit card of their own. Many young adults who get their first credit card on their own establish a negative credit history that takes years or decades to put behind them. By teaching your child how to responsibly use credit in an environment where you can make sure they do just that can be a very valuable lesson."

Read about how to teach kids about saving money >>

Monitor your teen closely

Tip: Sit down with you teen on a monthly basis to talk about their credit.

If you are helping your teen establish credit, it's important to closely monitor his/her spending. "If you don't monitor your child's credit card spending, you could be reinforcing bad habits," says Larson. "The card must be paid on time or you might actually be hurting your child's credit history."

Sit down with you teen on a monthly basis to talk about their credit. Look over the credit card bill together. Talk about expenditures, spending habits and paying off the bill. By doing this monthly, you can stop any real trouble before it starts.

Read about how kids can make money >>

Best credit card options

You have several options for getting your child a credit or debit card. Larson outlines these top choices:

Cash back credit cards

For parents who prefer adding their child as a secondary card holder, it's a good idea to sign up for a card that the parent will benefit from, too. Keep in mind a big benefit of this approach can be to help your child establish a positive credit history, but you need to keep close tabs on your child's spending. One option is the Capital One Cash card. It features a zero percent intro APR on purchases and balance transfers until February 2013, 1 percent cash back on all purchases, a 50 percent bonus on the cash back you earn every year and a $100 bonus after you spend $500 in the first three months. Or if you'd like to see the other options out there, take a look at's credit card reviews.

Pre-paid debit cards

If you'd like to get your child their own pre-paid debit card, BillMyParents Reloadable Prepaid Mastercard® is a smart solution because it was literally developed to help parents manage their teen's spending. It offers all sorts of great features, including the ability to put your child's allowance onto the card, being texted every time the card is used with the purchase location and amount, and being able to lock/unlock the card via text. Although this card won't help establish a credit history for your child because it's a debit card and not a credit card, it's still a solid choice.

Credit cards for college students

For older kids who are in college, you could try the Citi Dividend Platinum Select Mastercard for College Students. Parents do not need to cosign on this card and it offers a zero percent APR on purchases during the first seven months as well as cash back rewards.

"Even though understanding personal finance is one of the most important life skills for people to learn, it is virtually not taught at all in our educational system," says Larson. "So it's up to parents to teach their children this critical knowledge. Giving your child a solid foundation on the subject is truly something that will positively impact them for a lifetime."

More money tips

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How to raise financially independent children

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