Credit Card Advice for Young People

Educating the younger in our society about responsible credit card activities is mandatory if we are to help keep them from becoming overwhelmed in this area.  Instead of running from the problem, better it is to meet it head-on with straight talk that can help them learn how to manage credit cards and these accounts.

Here are six items that should be included in any talk to young people about credit cards and how they can affect them for good or ill:
Start Out Small.  Choose one card and teach them how to master it before allowing them to obtain more cards.  This is especially helpful in that they will soon get over the initial excitement of having a card.  The first thing they want to do is to make a purchase, so accompany them on this task in order to help them make a responsible choice and tell them how the purchase will show on their account and how they will have to pay it back.  Discuss where the money will come from to pay for the purchase after the statement arrives.

Low Credit Line.  Keep the credit line below $1,000 at first to help keep from being tempted to run up the balance to that limit.  While some credit cards will start with a higher amount, they can be talked into keeping it low if it will help the card holder.  This is usually only temporary, because once a card holder becomes active on an account, the credit limit usually rises automatically.
Pay the Balance Off.  Be sure to make them pay off the entire balance every month in order to avoid charges and fees associated with maintaining a balance on the card.  They need to see the money going out to make a payment on the purchases that they have made.  Impress upon them that after the thrill of the purchase is over, that the responsible card holder pays the balance regardless of how they now feel about the item.  This gives them a realistic view of the expectations of having a card and how they can be dulled over time.
Review a Paper Statement.  Have the person look over a statement with a more experienced adult who can point out the important items to keep an eye on.  The need to see the purchases listed on the statement and know that because of them, they now have a balance on which they must pay.  Show them the due date and have them prepare the payment in advance to make sure that they when it mail it to make sure it is applied to their account before late charges are incurred.
Watch for Enticing Offers.  Do not allow them to become caught up in the glitz and glamour of special offers because of having a credit card.  Help them understand that the credit card companies only offer these to obtain their business so that they can charge the fees and interest from them.
Sign up Online.  Make sure that the card holder signs up on the Internet so that they can monitor card usage and balance information.  That way, they can react quicker to anomalies that they find in the course of having and using the card on a daily basis.
Engage Help.  Show them how to contact the credit card company in case they run into issues that will cause them to pay more in interest and fees.
If these steps are taken, then there is a higher chance that the new credit card user will be successful in responsible habits with their accounts.

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This entry was posted on Thursday, March 5th, 2009 at 6:48 pm and is filed under Credit Card Advice, Credit Card Debt, Financial Advice. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.