When your child turns 18, it gets harder to know what’s best for them.  They can vote, buy cigarettes, join the military and get married if they want.  Legally speaking they’re an adult; but chronologically (and maybe mentally) they’re still a teenager.

Since the passing of the Credit Card Accountability, Responsibility and Disclosure (CARD) Act, getting your teen a credit card is more your decision than theirs.  The law states that no one under 21 can obtain a credit card without a co-signer or sufficient income.  How then do you decide if an 18-year-old is ready for credit?

In order to decide, you have to understand your options.  There are a few different ways to get credit for someone who is 18.  The level of risk to you and them varies.

Student Credit Cards

This is probably the most popular option for a young adult’s first card.  It requires a cosigner, but you also wield some power over the card.  The nice thing about these cards is that the credit limit is relatively low, usually about $500 to $1000.  This will give your new cardholder less opportunity to be overtaken by credit debt.  With a student credit card, you also get the added bonus, as the co-signer, of being the only person you can approve a limit increase.

This type of card is best for someone who is responsible and trustworthy.  The point of a student credit card is to begin establishing credit and learn good money management habits.

On the flip side: if you have the sneaking suspicion that your teen might go out and buy a flat screen TV or treat themselves to a shopping spree, this may not be the best card for them.

Pre-Paid Cards

This is going to be the safest option for you, but the least beneficial for your 18-year-old.  Simply put, you load up the card with however much cash you want and they have the ability to spend that cash in whatever way they choose.

A pre-paid card works well as an emergency fund or an allowance.  Once the money’s gone, it’s gone.  The card is reloadable, so you only give them access to money when you add to the balance.  Since there isn’t an actual line of credit attached to it, there’s no risk for you or your child’s credit report.

On the flip side: this is just about the same as giving your teen a wad of cash.  They don’t build any credit, nor do they learn anything about bill paying.  If your goal is merely to provide them with funds, then this is suitable.  If you have an interest in teaching them about credit though, this will only show them how to swipe a card.

Adding Them to Your Credit Card Account

Giving an 18-year-old a charge card attached to your account does have its benefits.  It enables you to keep an eye on their spending habits by giving you full access to all of the charges they make.  Some companies may even allow you to set a spending limit for them.

It could be a good trial run before you decide to co-sign on a student card.  If they can show restraint regarding the use of their card and make payments on time to you for those charges, then you can feel a little more at ease when you sign them up for an account.

On the flip side: by doing this you are taking on a considerable amount of risk.  In the event that your child decides to have a field day and racks up a bunch of charges, the ultimate responsibility of paying them off falls on your shoulders.  This will teach them little to nothing about the difficulty of owning credit.

Which do you choose?

Ultimately, you have to decide on how trustworthy your child is and what risk they pose to your credit and their own.  Establishing credit history and teaching financial responsibility are vital to your 18-year-old’s success as they mature further into adulthood.  Whether or not they are ready for it the moment they turn 18 is a decision only you can make.