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Teens Talk About Managing Their Credit Cards

 | Sep 22,2007


Plastic rules, or so say some of the teenagers interviewed for this article. One actually has to agree that plastic seems to be the 'king' when it comes to creating credit. However, as some of the young people revealed, while having a credit card can be the beginning of financial freedom it can also lead to major adult headaches.

First Exposure to Credit

Many teens get their first credit card when heading off to college, some before even reaching 18. Sadly, many are not prepared for the responsibility of having 'unlimited' spending power and end up owning thousands of dollars in credit card debt before even landing their first job.

For Heather, going away to college was the beginning of freedom, and she was overjoyed when her parents also gave her, her first credit card. However, Heather was way ahead of her peers when it came to managing her spending. She said that her parents always encouraged her and her siblings to budget, so it was just natural that she did the same even with a credit card. Heather admits that she periodically spends a little more than she plans, but always ensures that she pays more than her monthly minimum. She also has an automatic payment schedule set up so that her monthly payments come automatically from her saving account.

Overspending is Easy

Unlike Heather, Jessica, says she was so happy to have a credit card and that she spent and spent and got herself into trouble. She admitted being more than $2,000 in debt by the end of her second year in college. Jessica admits that she had no sense of money management before getting her credit card. At home she never needed to budget or worry about paying bills; she thought owning a card was the "gateway to shopping heaven." She said she loved going shopping and telling the cashier to "charge it" because it made her feel mature. With her parents' help, Jessica said she is on her way to clearing off her debt and has become much better at managing her spending. She now uses only a prepaid credit card and has begun budgeting to ensure that she does not overspend.

Receiving Credit Early

Jason, age 19, said that he has had his own credit card since he was 15, so he understood the need to be responsible when he headed off to college. His parents had co-signed for a card for him, which gave him $2,000 in credit. He noted that the temptation to pay for everything with his card was great, especially when with friends. He said that to control overspending he presets spending limits when going out and sometimes takes cash instead of his card. As he explains, "With cash when it's gone, it's gone."

First Taste of Freedom

Tara admitted that she knew about budgeting and using credit wisely; however, the freedom of being away from home made her careless. She always spent with the intention to earn enough to pay off the debt being incurred. Unfortunately, there were times when the expected payment did not materialize. She said she went into the trap of getting two new cards to pay off the old one and before she knew it she had exceeded her credit limit on all three cards.

By the time Tara graduated from her university in 2005 she was heavily in debt. She said that she is on her way to becoming debt-free by utilizing the services of a financial planner. She has started saving and has so far repaid and cancelled one of her credit cards. Her financial planner has helped her get a reduced APR from one of the card issuing institutions which has reduced her monthly payments.Tara noted that had she known about some of the possible pitfalls of owning a credit card, she would have exercised better judgment in spending.

Teaching Kids Money Management

The teens all agreed that money management should be an important lesson taught not only in school, but by their parents as well. Parents have a responsibility to provide information on using credit cards wisely to their children, especially now when younger kids can get them. While having a credit card helps teens build their credit rating as they enter adulthood, as can be seen from the examples above it can also start them off on the wrong footing if proper guidance is not given beforehand.

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