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The system is designed to teach kids how to budget, save, and use plastic responsibly.
This establishes a credit history on the child’s credit file and puts him or her in better position to qualify for a traditional card when the time comes.
A secured card is one that sets a credit limit based on the size of a security deposit placed on the account, typically $300 to $500. Transactions are handled in the same manner as they are on traditional accounts: the user makes purchases, the purchases show up on the statement, and the user makes the required payment by the due date.
In choosing a secured card, look for one that reports to the credit bureaus as unsecured (more favorable), has a grace period for paying off purchases without incurring interest, has a low or no annual fee and has low fees overall.
This type of card, and there others out there, offer young teens the opportunity to learn to how to manage credit and build financial credit skills in a safe environment.