Credit Teens with Some Intelligence
As you leave home for your college experience, it is wise to have a credit card or two for emergencies and/or large purchases. In fact, it can be exciting to have that first bank or gasoline credit card tucked away in your wallet. Credit cards are important to build up credit history, but having them can be risky. It is sometimes very easy for students to misuse credit cards, especially when they are overwhelmed by the cost of a college education. To avoid costly problems down the road, teenage consumers can follow a few simple steps to stay credit savvy.
Accessing information from the National Consumer League (NCL) is a good start. NCL is a private, nonprofit membership organization that aims to protect and promote social and economic justice for consumers and workers. NCL offers the following tips to help college students make smart choices when using credit cards.
- Compare Offers: Pay close attention to the interest rates for purchases. Many credit card companies offer low (often zero percent) introductory interest rates, but after the introductory period ends, you may be trapped with an above-average interest rate.
- Set a Budget: Try not to charge more than you can pay off each month. This is important for building credit history and a good credit score.
- Read the Fine Print: We know, it’s a lot to read. But before you sign anything or check that box that says “I agree to these terms and conditions,” check for any hidden fees or costs associated with the credit card, such as an annual fee.
- Pay on Time: This is another important factor for building good credit history. It may not seem like a big deal now, but if you ever want to purchase a house or car in the future, a history of late payments on your credit report might derail your plans. Most credit card companies also charge late payment fees when you don’t pay on time, which will only add to your debt.
- Watch Your Credit Limit: You may receive a credit limit of $1,000, but that doesn’t mean you should spend that much money. To build good credit, try not to charge more than 20-30 percent of your credit limit each month, and pay off the balance as quickly as you can. Besides, you never know when you might need a credit card to pay for an unexpected emergency, such as a flat tire or a root canal. You may be out of options if your credit card is maxed out.
- Manage Your Account Online: An online account will help you pay on time and manage your expenses. Many online systems even offer scheduled payment reminders and auto-debit payment options, which will help you avoid late fees and other penalties.
The NCL website offers great advice to help students understand credit, manage their money, and avoid scams. To help teens become savvy consumers, NCL started LifeSmarts, a national program to help high school and middle school students learn more about personal finance and consumer rights. Check it out today! After all, it pays to be educated.