Teens banking on their parents' credit cards
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By MELISSA DAHL The Sacramento Bee - Published: April 16, 2006
SACRAMENTO, Calif. — Parents have been known to hand over a credit card in their teen's name with instructions to use it only in an emergency. But any teenager with nothing to wear on a Friday night knows how tempting it is to redefine a crisis.
Thirty-one percent of 18-and 19-year-olds have a credit card in their own name, and 68 percent of teens report having never discussed responsible credit card use with a family member, according to Credit Abuse Resistance Education. (Younger teens are harder to track, since their parents have co-signed for the card.)
Whether you're thinking about getting a credit card for the first time or you've been charging for years, it's important to be responsible enough to handle it.
"If your parents think — or you've persuaded them — that you're mature enough, then be mature enough," says Janet Bodnar, deputy editor and columnist for Kiplinger, a personal-finance magazine. To use your credit card wisely, consider these tips from financial experts.
1. If you have a card, have only one card. Also, make sure you have a low credit limit on that one card, says Larry Frazen, a bankruptcy lawyer in Kansas City, Mo., who volunteers for Credit Abuse Resistance Education.
"Teens often think the fatter your wallet is, the cooler you are," says Dara Duguay, director of Citigroup's office of financial education, who agrees that most teens need only one credit card.
2. Pay off your balance completely each month. Never make only the minimum payment, and don't charge unless there is already money in the bank to pay for it. If you must carry a balance, make sure to monitor it each month.
3. Remember that having a credit card doesn't make you any richer. "Immediately they think that they suddenly have had an increase in their wealth," Bodnar says. Most people react this way, but teens tend to do so to the extreme. "It's a visceral reaction, but teens are more susceptible," she says.
4. Draw the line between needs and wants. Need a simple way to figure it out? "If you can eat it, drink it or wear it, it's not an emergency," Duguay says.
5. Crunch the numbers for yourself. To figure out how long it will take you to pay off real or hypothetical credit card debt, use a credit calculator at Kiplinger.com.
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