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“It’s not extra money” and Other Things Teens Should Know About Credit Cards

By Rachel Meeks

Thank you to Equifax for underwriting this conversation about talking to teens about personal finance.

One night when I was in college, I went to a basketball game with my friends. We noticed a crowd of people gathered around a table outside the stadium. They were giving away free t-shirts for the game, and all we had to do was fill out an application for a credit card.

I didn’t want a new credit card, but an application seemed harmless, and I didn’t know that I would even get approved. Besides, getting free stuff was something that my friends and I were really good at. Along with all the other college students around me, I got my free t-shirt.

It’s compelling to join that group mentality, but I’ve learned that when it comes to credit cards, you don’t want to go along with the crowd.

As an adult, I’ve volunteered to teach personal finance classes to teens in local schools. This is what I want teens to know about how credit cards work before they go off to college:

1. It’s not extra money so you can spend more than you earn. A line of credit is not income, it’s debt. It can be used to help manage cash flow, but it can also be a heavy burden to carry. When you see other students use credit cards to buy things they can’t afford, know that they will have to pay it back later, and it won’t be easy for them.

2. Borrowing money is expensive. An interest rate can look small, but it adds up in a way that makes a restaurant meal, or music, or a new shirt cost much more than expected. If you make small payments instead of paying off the balance in full, you’ll be making those payments for years. Many adults have learned this the hard way.

3. Pay your bill on time, always. Companies keep track of your payment history on a credit report. It can affect your ability to get a certain job or buy a house. Even though I cancelled the card I received when I applied for a free t-shirt, that still went on my credit report.

4. When you don’t pay on time, there are big late fees. Pay attention to the fine print on the back of your statement, and if you don’t understand it, ask someone. You need to know what you’re getting into ahead of time.

What do you wish you had better understood about credit cards and borrowing money when you were younger? What would you tell teens now?

Photo source: iStockPhotos/ Thinkstock

Thank you to Equifax for sponsoring this conversation on speaking to your teen about personal finance.

About the Author

Rachel Meeks

Rachel Meeks is the voice behind the popular blog Small Notebook, a resource for simplifying and organizing your home. (Because it’s so much easier to b...

Rachel Meeks is the voice behind the popular blog Small Notebook, a resource for simplifying and organizing your home. (Because it’s so much easier to be a parent when you’re not surrounded by a ton of stuff.)

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