(When) should we encourage DD to get a credit card?

[TeenTimesTwo]

DD1, 19, lives with us rent free, and is OK with money, managing her pay well, saving for yearly bills such as car insurance.

We are wondering when / whether we should encourage her to get a credit card. This would not be for the credit (we would expect her to set up a direct debit to pay it off in full each month), but more to build up a credit rating, and also for the guarantee it helps give when purchasing things online.

The big risk of course is she spends too much. But is that better learned when with us than once she's moved out?

Any opinions / advice?

Watching with interest as my daughter (18) was also discussing the same with me last night. I think she would just put £100 a month into it and clear the balance. It’s easy to monitor via an app. Unfortunately she has a father (exh) who was terrible with money, hiding 20k debt, so I m super cautious about it.

No I don’t see the point in having one I would rather encourage them to open an isa and save for the unforeseen. It’s better being able to save without ‘HAVING’ to spend....imo.

You should absolutely never, encourage anybody to get into debt. She doesn't need a credit card at 19, it won't end well.

I'm absolutely not encouraging her to get into debt.

Since she left college 2 years ago we have set up the expectation that she saves for things before she buys them, and she pays for things upfront. e.g. car insurance paid yearly, no contract phones etc.

She also has a savings account that money gets transferred into monthly.

It would be purely to help build up credit rating, as I'm thinking that would be useful for (A) eventually passing rental checks or getting a mortgage and (B) the guarantee you get when purchasing things using a credit card over and above a debit card.

But maybe a credit card isn't necessary to help credit ratings?

Hmm, not sure I agree with the 'never have a credit card' approach, credit cards aren't all about getting into debt, it's about understanding how you can manage credit to your advantage whilst maintaining discipline and not spending beyond your means. My parents were really truly terrible with money and 'be terrified of credit cards' is the one lesson they taught me (in a do as I say don't do as I do fashion), and it's not even a particularly good one

There's lots of good reasons to get a credit card, e.g. for use in emergencies, to build up a credit rating, for purchase protection, for the rewards/cashback some providers give. Providing you take a sensible attitude to credit, i.e. never spending more than you can pay back, there's no reason not to have one and to use it for the majority of your spending. In fact some very financially savvy people make money by 'stoozing', i.e. paying all their salary into high interest savings or investments, doing all their monthly spending on a 0% interest credit card and then repaying at the end of the year/0 interest period.

I don't suggest your daughter starts there however OP! But hardly anyone goes through life without using some credit (e.g. overdrafts, mortgage, even paying bills in arrears is a form of credit) so I do think starting to learn to use responsibly is something every young adult should go through. That being said I don't think I got my first credit card until I was in my mid 20s and even then I kept it in the freezer for emergencies as per my mother's slightly dubious advice!

So if she hasn't expressed an interest yet then maybe just leave it for a while. There are other ways to build a credit record and the temptation of a big credit limit might just be too much at her age! Any particularly big purchases that need credit card protection you could put on your card for her and she can repay?

Yes I absolutely agree, a credit card will help build up her credit score. Use of a credit card, relaying the balance in full by direct debit will help demonstrate she is credit worthy.

Repaying balance in full not relaying!

What else can she do to build up a credit record? She's on the electoral role, and employed. What next?

credit score

A small overdraft on her main current account (which she never uses) is a good one if she doesn't already have one. Paying a bill by direct debit is another (difficult if she lives at home but she could pay for something as a household contribution?)....

Mobile phone contract. It's one of the basics for credit building.

I would never encourage anyone to get a credit card either. very bad move.

I have just been looking at a book on money for young people and this is something that the author encourages you to do, precisely to build up your credit rating. (And put your child's phone in their name as early as possible as well - not relevant here though.)

She absolutely should get a contract phone. That will help build it up. It's a set price per month so nowhere near the risks of credit card spending.

I had a catalogue account from age 18 although at the time all purchases were interest free. I also had a credit card. I wasnt the type to go crazy with spending on them though so it depends on the particular person.

Both of my children got credit cards at 18 and have used them very wisely to build their credit scores. They use the card for gas and other small expenditures, and pay the bill in full every month. They both have excellent credit now and both have already saved a substantial amount of money. My 22yo has £20k in savings and he also has several forms of investments. Without a good credit score, your children will be very hard pressed to live independent lives.

My husband and I have very openly talked to both of them about money and the dangers of debt since they were young teenagers. Sadly, I think it's a topic many parents never discuss with their children, or they leave it for too late. Learning to manage money is a critical life skill, as is knowing the difference between "want" and "need."

The which website has information as does money advice service. Money Advice Service is a charity and includes the cons as well

which

money advice service

Ds 23 got his to go on holiday and hire a car.
Dd 21 has a copy of mine, for when she needs stuff at uni, and Camp America

www.experian.co.uk/consumer/guides/building-credit.html

yes it helps credit rating

she could put petrol on it etc

I don't know what's the lowest limit you can have, but mine is set at £500.

also isn't it safer if she pays for things online?

What I don't like about contract phones is the fact you are tied in, so if she e.g. was made redundant, she'd be liable for ongoing payments. Our whole family is PAYG.

Thank you for the useful links and the views so far.

I got my first credit card as soon as I turned 18.

I've never been in debt other than my mortgage. I have never in almost 20 years not paid the bill off in full every month. I now have a credit card where I earn points and get sent vouchers three times a year. Unless you have no self control why wouldn't you have a credit card? I buy everything with my credit card, right down to tiny purchases like chocolate or a bag of crisps.

Well I have never had a problem getting a rental or a mortgage and I have never had a credit card, still don’t 🤷‍♀️

Your daughter could get a Giffgaff contact. Not tied in and I bet it'd work out less expensive than PAYG

If DD wants to start saving for a house/rental having a credit card really helps to build up a credit score for the mortgage. It would be a lot harder without and it also shows responsibility. You can set the limit to a very low amount.

I use mine for everyday things and always pay it off in full every month.

And as you have stated you get a lot more protection with using a credit card.