Everyone Should Start With A Secured Credit Card

Everyone Should Start With A Secured Credit Card

Getting your first full time job is an exciting time for everyone and before you know it you start to get your own mail about credit cards, car loans, mortgages and all the other financial things that go into being an adult. It seems like you are not an adult until you have your own credit card, of course the flyers from the bank make it all seem so easy to do. Fill out this form and you are guaranteed your very own credit card in just 14 -21 business days.

The day most teenagers recieve a credit card is the day when trouble starts. When you are in school you learn history, math, geography and maybe you take a business class or two. These classes are all vitally important and may seem to equip you for work, they teach you nothing about real world economics. As we use checkbooks less and less , England is aiming to phase out checkbooks altogether by 2015, there is no real physical trail of what we are spending. If the shop accepts the credit card that is all that matters isn’t it?

credit cards for teenagers

credit cards for teenagers

Credit Cards Are Not Real Money
A credit card is basically a chance for you to get a short term loan when you need it without having to fill in paperwork all the time. You need a tank of gas but don’t get paid for a month, put it onto a credit card. It sounds so easy doesn’t it? The bit that people do not think of is that they still have to pay for the gas. Using a card just defers the payment until the bill comes in. People will often make purchases with credit cards that they would not make if it required cash. While it may feel like you are spending real money at the time, the minute the bill from the card company drops on your doormat it will seem very real.

Secured Credit Cards Teach Fiscal Control
Your own money is used to secure the credit card, so if you don’t pay the bill they still have your money. You can not run your bill up above the amount of cash you deposit, so the actual exposure for you is nothing more than the original deposit. You can see how this is the perfect solution for teenagers. A parent could set up a card with two hundred dollars and give it to their son or daughter. There is little to no real financial risk but the teenager learns how to manage a credit card.

By limiting their exposure to real financial problems you are protecting your son or daughters future but they are still in control of how they spend their money. After a year of two of using a secured credit card sensibly they can jump to a real card and the chances are that they will never go crazy with it. Unlimited credit and lack of impulse control are what causes the real money problems with teenagers. You may not be able to teach them to manage their temprements easily but you can make sure that they do not have access to unlimited credit.

Carrot or Stick
One other thing that I have seen used is the carrot approach. For each month that the bills are paid in full a specified amount is paid into a savings account, with a bonus if they hit it for all 12 months. The stick is that they not only dont get the payment into savings but they will pay interest on the amount that is left on the card. Make sure they understand that they are paying twice and the meal they bought when they couldnt really afford it may have only cost $20 but in reality it has cost a lot more due to the interest and the loss of the carrot payment.

If your monthly carrot payment is $50 then that one meal which they now can’t pay off could well cost them $80+ , sitting down and looking at the math of the situation should scare them into paying the full bill the following month.

Bad Credit Score
It can be hard for a teenager or young adult to realize the implications of a bad credit score. Missing a few payments on a credit card doesn’t seem to be the worst thing that could happen does it? Of course the reality of those missed payments are higher interest rates on car loans, mortgages and store cards. Their car insurance cost may go up and the same goes for home insurance. All because of a few missed credit card payments.

Filed under Secured Business Credit Card by #

Leave a Comment

Fields marked by an asterisk (*) are required.