Teaching Teens How To Handle Credit

Merchant Warehouse |

May 31, 2012

Merchant Warehouse has been involved in the credit card processing business since 1998. As a result we have an inside look at the power of credit and its impact on both merchants and consumers. We hope to use this knowledge to continue to provide helpful information and education to all parties involved in the credit card processing industry, from consumers to business owners to point of sale developers. The following is an article aimed at aiding teens and parents who are looking for more information on the power and responsibilites associated with a credit card account.

Credit cards have definitely changed the way Americans handle money. Now they are considered a part of Americans’ daily lives. They continue to be utilized extensively for everything from grocery purchases to high-end products because many people find that they are very convenient to use. They grant their holders access to money, so that the holders could buy anything they need or want without bringing cash with them.

Although credit cards present very good opportunities for consumers, they can be very risky to use as well, especially when the holder is not responsible with money. Many American cardholders are suffering from the consequences of mishandling credit. There are even people who can hardly pay off the amount they spent through credit card purchases. In fact, statistics reveal that an average American has at least $6,000 credit card debt.

Now that credit card use is extensive, more and more teenagers and kids are gaining access to credit cards. Unfortunately, not all of them know how to handle credit wisely. While it’s true that credit cards come with responsibility and accountability, many kids and even adults think that with credit they can just buy everything they want without thinking of the consequences. Sadly, this misconception among credit card holders often ends up in credit card problems.

Using credit cards can be very risky for teens. However, it is not wise for parents to keep their children from knowing about credit either. In order for teens to spend funds wisely, they must know how to handle credit wisely as well because as soon as teens reach 18 years old, they can easily apply for credit cards of their own. Once they can, a parent can no longer directly interfere with their credit card purchases, making it difficult to teach them. While the kids are still young, teach them the following:

  • Credit cards can be handy in times of emergency. Credit cards can be used as substitutes for cash, which is why they can be very handy when cash is not readily available. Once the credit limit is reached, however, there is no way to continue to spend on that card.
  • Learn how to discern credit cards. Not all credit cards are made equal. They can have different interest rates, credit limits and grace periods. The fees for late payments could vary as well.
  • Credit card companies are not charities. They are not just handing money to consumers for free. They are trying to make money for themselves. Credit card purchases allow the cardholders to use the company’s money for their purchases. It’s like a loan, wherein spent credit earns interest. Remind your child that for every purchase there will be interest to pay. Also, let him or her know that the credit card bill will arrive, and that to maintain a good standing with the credit company at the very least the minimum balance should be paid off before the due date. Otherwise, there will be extra charges for late payments.
  • Credit rating is very important. When someone is using his or her credit card, he or she is establishing a credit rating. A credit rating is not something to be taken lightly. It reflects upon every credit purchase and is an indication of how well a certain holder handles funds. Bad credit ratings could eventually end up in high interest rates while holders with good ratings can often have their interest reduced.

There are more that kids should consult concerning handling funds. For more information, you may visit the following sites: