Credit Cards for Kids -- Can Yours Handle One?

It's a conversation every parent dreads. Your teen has come to you and asked ... for a credit card.

What now?

If you think getting your child a credit card in high school is a way to teach financial responsibility before the onslaught of college credit-card marketing inevitably overwhelms your kid, think again.

Getting a credit card while they're under your roof isn't necessarily going to teach teens how to use cards responsibly. High school seniors who had credit cards actually did worse on the Jump$tart Coalition's personal financial literacy survey than their counterparts without credit cards.

And there's nothing inevitable about college credit card usage: only 35% of four year college students have credit cards, down from 57% just a few years ago, according to a survey by New Jersey-based Student Monitor.

So if you want your teen to stay debt free, the best solution may be to simply discourage him from getting a credit card.

"If a student doesn't have a credit card by the end of their freshman year in college, they're probably not going to get one," says Eric Weil, managing partner at Student Monitor.

But keeping your kid away from debt doesn't necessarily mean keeping her away from plastic. Instead of using credit cards, many students are opting to use debit cards. Between 2001 and 2008, the number of four-year college students with a debit card jumped 16 percentage points to 59%. Virtually the same number of high school seniors surveyed by the non-profit DC-based Jump$tart -- 54% -- had ATM cards.

Prepaid credit cards are another option for parents of high school students. They offer the protections of a credit card and the opportunity to build credit without the risk of debt, and holders avoid debit card-related overdraft fees. In recent years a handful of companies, including PAYjr., Allowance Card and Upside Prepaid card, started marketing cards for high school students.