Dave Ramsey Says You Should Not Give Your Teen a Credit Card. Is He Right?

Are you helping your child learn how to manage a financial tool or giving them a loaded weapon?

Popular financial author and radio host Dave Ramsey makes no secret of his views on debt. In one article, he says it "flat-out stinks." In that context, his recent tweet on not giving your children a credit card is hardly surprising. Ramsey said, "Your teenager does NOT need a credit card." Let's dive into his reasoning and find out if it holds water.

Why Ramsey says teenagers don't need credit cards

Two of the biggest arguments for giving a teenager a credit card are to teach them how to use credit and help them build a credit history early. Ramsey vehemently disagrees with both. He believes credit is dangerous, period. So there's no such thing as learning how to use it responsibly. And he doesn't think we need to build a credit history. For him, the most responsible use of credit is not to have it at all.

No stranger to hyperbole, Ramsey compares giving a teen a credit card with allowing them to sleep with a gun. In a blog post, he says, "You are not teaching your 16-year-old child to spend responsibly when you give him or her a credit card any more than you are teaching gun responsibility by letting him sleep with a loaded automatic weapon with the safety off." 

It's worth clarifying that by law, under 18-year-olds can't get a credit card in their own right. If you want to give your child a credit card, you'd need to add them as an authorized user to your account. On top of which, the 2009 CARD Act means under 21-year-olds need to prove they have income to cover any payments or apply with a cosigner. 

What Ramsey gets wrong about teens and credit

Ramsey is right to say that credit cards can be dangerous. It is all too easy to overspend and run up a balance you can't afford to pay off at the end of the month. This can prove costly, as credit cards often charge high interest rates. Plus, missed payments can mean late fees and damage to your credit rating.

All the same, credit cards are part of our society whether you like them or not. According to research by The Ascent, Americans owed a total of $841 billion in credit card debt in 2022. There can also be benefits to using a credit card, including getting rewards for your spending and potentially snagging lucrative sign-up bonuses. Some cards also offer additional consumer protections like insurance. 

Ramsey would likely disagree, but it is possible to use a credit card without getting trapped in a debt cycle. We teach our kids to handle all kinds of dangers in life, such as driving a car or crossing the road. Why not teach them to use a credit card? Show your teenager how to pay their balance in full each month -- and what the consequences are if they don't. Sit down with them and talk about interest rates, late fees, and credit scores. 

This isn't about giving teens free rein to run up a balance they can't pay off. Instead, agree on some ground rules and set limits on how much they can spend. In addition to teaching your teen about using a card, there are other benefits to starting early. These include:

• Building their credit rating: If you make your payments on time, adding your child as an authorized user can help them get started on the credit score front. Talk to your card issuer about what age they start reporting positive activity to the credit bureaus. 
• Fraud protection: Most credit cards offer strong protections against fraudulent charges, meaning you're protected if the card is stolen or someone skims the details.
• Credit card rewards: If you have a rewards credit card, you can earn points for your teen's spending. 

Be aware that if you co-sign an account or add your child as an authorized user, you will be responsible for any debt they run up -- and their behavior could impact your credit score.

A couple of credit cards let you set a different credit limit for an authorized user, which could help minimize the risks. 

On the other hand, if you don't teach your kids to manage credit, there's a risk they will wind up in trouble later in life. Ramsey himself points out that credit card companies target young people, though there are limits on what they're allowed to do. The just-say-no approach will only go so far when your kids enter a world where all their friends have their own cards and you have little control over their decisions.

Bottom line

For sure, there are risks associated with giving your teen a credit card, and it needs to be done with care. If they are already struggling to manage money, now might not be the right time to give them access to credit. But if they have a good understanding of their finances and know how to make a budget work, a credit card could be a good next step.