A teen credit card just doesn’t seem to always work well. Statistics show that teenagers have a tough time managing not only their credit cards but their budgets in general. A teen credit card holder is likely to go over their limit and also fall behind on repayments. Maybe it is irresponsibility, lack of foresight and not realising how it can impact credit scoring or simply a lack of financial education. It’s not easy for young people to balance the downturn in the economy with rising prices – especially in the cost of education - but a teen credit card used and managed responsibly can be a great budget management tool. Here are 10 Credit Card Commandments for Teens:
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1. Shopping
Shopping and credit cards for teens should go hand in hand. Tons of companies offer credit cards which come with a number of introductory offers and discounts. Choosing the first offer you see is never a good idea. Use the internet and shop around for the best discounts and rates you can find.
2. Overspending is a Sin
A teen credit card provider will set a spending limit, but avoid the temptation to spend it all. Only use your credit card when you absolutely have to.
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3. Pay Now!
One of the worst things a teenage credit card holder can do is spend lots of money and then fail to pay it back on time. When you spend some money on your credit card there is usually a few days before the interest appears. If you can pay this back before any interest or late-fees hit, then you can build up a good credit history for yourself.
4. It’s Not Yours!
What many people seem to forget when using their credit cards is that the money they are spending when they use the card is not actually their money. This is the trap which so many people fall into, and you, yourself, may have already fallen into it in the past. This is why it has to be stressed that your credit card should only be used in an emergency.
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The illusion of free money can be alluring but remember, every swipe comes with responsibility. Think of your credit card as a short-term loan that must be repaid, often with interest. If you treat it nonchalantly, you may end up in a cycle of debt that can quickly spiral out of control. Budget wisely, and ensure that you have the funds to cover your purchases at the end of the month. It's a tool for convenience, not a means to extend your spending capacity.
5. Build a Credit History
One advantage for a teenager with a credit card is that you can present yourself to future lenders as a good risk. This is not to say that you should be going out and spending lots of money just to pay it back, but when you do spend some money you should make sure you pay it back on time.
6. Safety is Key
One of the golden rules for not only teenager credit cards but all cards, is they should be kept safe. It’s not just the fact that someone can steal money, they can steal your identity too. The effort involved in keeping your cards safe is a lot less than the hassle of getting them replaced.
7. Always Read the Terms
Before making an application for a teen credit card read the terms and conditions. Yes they are incredibly boring, and yes the print is small, but you are better off overall if you know exactly what you care committing to. It sets the boundaries for the management of your card.
8. When Cash is Bad
Another problem with not only credit cards for teens but all credit cards, is that they charge so much for withdrawing cash. Furthermore, there are no grace periods before interest kicks in here, and you will also have to deal with the added fees of withdrawing from an ATM machine.
9. Never Use Store Cards
One type of teen credit card which should be avoided is the store card. Yes, they offer great money off on a few initial purchases, but they more than make that money back with the high interest rates which come with them.
10. Consider Cashback
Cashback credit cards are great for those who either want to earn some extra money or just want to save on the charges. If you are someone who can’t pay off their bills every month then these cards at least give you some money back on some of the purchases you make.
It should be noted that all of these credit card commandments for teens should be used in conjunction with each other for the best results. Teenage credit cards can be a big factor in financial independence as long as they are used and managed responsibly.
Top Photo Credit: weheartit.com
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