How to teach your child responsible management of personal finances? Many people will have the same answer: "If your son or daughter is a teenager or a young adult, allow him or her to have a credit card". They say that a credit card can prepare your child for adult life, that it can raise his or her financial education.
But these people usually say nothing about credit cards' pitfalls. There are plenty of them and they are not advertised. Those, who promote credit cards, do not talk about huge debts that are caused by high rolling spending sprees. Nor do they speak about the danger of giving a credit card to an unemployed student who has only one source of income - parents.
If you type in a phrase "student credit card" into any online search engine, you will immediately get thousands of links to different web-resources. You will see different ads, but practically all of them will say something like this: "apply for student cards from leading issuers", "best student credit card offers" or "use your student credit card when possible". Appealing slogans, bright ads and lots of promises.
Young people very often are conformists. So, they follow other peoples' decisions. "If my friend has a credit card why cannot I apply for one?" - this is how it works for young adults and teenagers. But credit card issuers have iron hands under velvet gloves and one should never forget that.
Some experts believe that college years are not the best time to start a credit history. They bring forward several arguments.
First of all credit card companies market their cards as a plentiful source of easy money. Most young people do not know how to manage their spendings and usually end up with a huge revolving credit debt. In many cases this means that their parents become responsible for the whole amount of debt. It was estimated that a usual college graduate has approximately $2000 in debt.
Secondly, young people do not treat their cards seriously. This means that young people max out their credit limit not because they desperately need money, but because they can do it. Unfortunately they do not realize that irresponsible spending habits can damage their credit score.
Thirdly, teenagers and young adults do not pay their bills on time. If only they read a credit card agreement carefully they would know that late payment can cause high interest rates. Which is more this can result in future refusal when applying for a mortgage or a car loan.
Well, all these problems are caused by lack of financial education of young people. They tend to believe aggressive ads that literally shout from the housetops about perks and credit card rewards. What is in a small print is left unnoticed and unexplained.
Only after young people get to know how to be responsible for one's own finances, they can make credit card applications. They can learn from parents or friends. In this case it is better to learn wisdom from the follies of others.
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