Managing that first credit card
Starting off on the right foot financially is critical for teens headed off to college. While changing credit card laws enacted in the wake of the recession offer greater protections against the onslaught of credit card offers targeting young adults, proactively addressing the right way to manage credit is the best way to ensure your college-bound student stays on track. Credit cards aren’t inherently bad – but can be abused. Here are some tips to share with your teen:
1) Recognize that using a credit card is like getting a loan. Until you pay it off, you have an outstanding debt. Think carefully about how long it would take to pay off the entire balance, not just whether or not you can make the minimum payment.
2) Know what you are paying in interest and fees. Rates and fees can vary widely. Be sure to read the fine print and find a low-interest card.
3) Pay your bills on time. Fees for late payment can be hefty.
4) Spend responsibly. Remember that there’s a big difference in “wants” and “needs”. If you don’t have the cash to pay for something, give serious consideration to whether or not you really need to buy it.
5) Build a good credit history. Your credit history will follow you and have a long-lasting impact on your ability to do things like buy your first car or your first house. Having a credit card and handling it responsibly helps you to establish a positive credit history. But overextending your credit and missing payments will negatively impact your credit, making it much more difficult to borrow money later on.