What Kids Need to Know About Credit Cards
When you and your children discuss the option of a credit card, talk about a general philosophy for responsible use. Make sure your children understand the following principles:
A credit card isn't free money. Charge only what you can afford to pay back. A credit card shouldn't be a money substitute for items they can't afford. Charges should be paid back in a timely fashion. When bills aren't paid in full, the outstanding balance collects interest charges. It's important to pay bills in full, but if not, at least pay more than the minimum payment due each month. Just paying the minimum payment due means that they are not reducing the amount owed because of interest charges added. It is important that students notify card issuers when they move so that account statements are delivered promptly to the correct address to avoid additional fees and interest payments.
There's a good chance that your college-bound teen will acquire a credit card while at college. Indeed, nearly two-thirds of today's college students have at least one credit card in their name. For most students, one or two credit cards that are widely accepted should be plenty. In selecting a credit card, advise your children to look for key features:
Low interest rates or finance charges (also known as APR or "annual percentage rate"). Low or no annual fee. A grace period before finance charges are incurred. Other benefits, such as extended warranties on purchases.
Brought to you by College Parents of America.
Source: Money Talks, Co-sponsored by MasterCard International and College Parents of America