6 Basic Things Teens Should Know About Credit Cards

Organizations like the Jump$tart Coalition and NFCC have rolled out programs that help you teach your kids about the ins and outs of credit cards, credit ratings, interest rates, etc., but Janet Bodnar at Kiplinger says that there are some basic facts that you should focus on. She thinks too much detail bores a kid; we think it depends on the kid, but agree that at the very least, hitting each point on the following list would give your offspring a decent foundation for making good credit decisions.

  • Credit cards are not free money
  • The card issuer charges interest.
  • Don’t max out your credit. “Hold your charges to 25% of your credit limit, or even less” if you want to max out your credit score.
  • Pay your bills on time to avoid screwing up your credit rating.
  • Blots on your credit record can affect your ability to get a job, rent an apartment, buy a car or get a cell phone, which is why the previous bullet point is so important.
  • Pay your bill in full each month, if you can, and always pay more than the minimum.

Visit the full article for links to online tools and resources from Kiplinger that you can use to help illustrate your points.

“What Teens Need to Know About Credit” [Kiplinger]

“Jumpstart’s Reality Check” [Jumpstart Coalition]
“College Credit for Life” DVD [National Foundation for Credit Counseling] (last item on page)
(Photo: Getty)


Edit Your Comment

  1. bohemian says:

    They forgot the #1 rule.
    Don’t get a credit card until you have a job where you can actually repay what you charge.

    Our teenager has a serious case of credit card aversion after I explained how universal default worked.

  2. anatak says:

    @bohemian: And Rule #0: You do not need a credit card – it is not a requirement of life, it is not a sign of maturity or success.

  3. rouftop says:

    To that I would add a piece of advice that my parents gave me:

    Tear up the checks they send you, and never, ever, ever use your credit card at an ATM machine. You start accruing interest the minute you get your cash.

    (Let them figure out how to take advantage of 0% balance transfers on their own, after they’ve learned appropriate fear!)

  4. I remember when my family made me get a credit card my first year of college. Yes, made me. I sure as hell didn’t want to have to remember to cut a check once a month for money I likely shouldn’t have spent in the first place.

    Is there such a thing as a “sucker talk” you can have with kids? As in showing the many ways in which America revels in taking advantage of the stupid? I guess it’d probably be limited to credit cards, smoking, and ponzi schemes, but it’d be worth having.

  5. LatherRinseRepeat says:

    Who gives their teen kids a credit card? That just seems like a bad idea.

  6. exkon says:

    Actually Rule#0: Know that whatever you’re going to tell the teenager, they probably won’t be listening anyways.

    Happened with my younger brother. Told him that he didn’t need a credit card and that if he “really” needed one to be super careful with the spending.

    2-3 months later, maxes out his $2000 limit buying things “needed”.

  7. UpsetPanda says:

    I got my first card when I was 16. My parents told me that I could buy whatever I wanted, but that they would know about it. This instilled some fear in me, so I would regularly call my mother if I wanted to buy something that wasn’t food, because I knew that she knew I had gone shopping. It was a ridiculously small credit limit too, so it wasn’t as if I was out spending $1,500 a month. When I got my second card, I spent more, but I knew my parents still knew what I was buying. I once bought 7 seasons of X-Files all at once, and called my mom to tell her what I wanted to do. She gave me the green light first, which gave me sound of mind because I did NOT want to face angry parents when they saw the bill. Sometimes it isn’t about what you buy, just the courtesy of talking to parents about it first. I think that is important to tell kids, along with the financial facts.

  8. ColoradoShark says:

    @rouftop: And call up the company and tell them to stop sending the checks. Those checks are probably great for identity thieves. You don’t know they are coming so don’t know they are missing.

  9. ErinYay says:

    Teach kids that all credit cards are is a way for you to pay extra to spend your own money. If they want something for $20, tell them to fork over $25, and see how much they like the ease and convenience of credit.

    What we’ll do is simply show them the cardboard box we live in because Daddy has credit card debt.

  10. darkclawsofchaos says:

    use a credit card only when it looks to shady for a debit card, that way, you could chargeback easily if things go awry, other than that, don’t use one, use cash or debit

  11. Pennsylvanian says:

    “credit cards are a way for you to pay extra to spend your own money”

    Wow. That’s perfect framing. Thanks. I’ll be using that.

  12. theblackdog says:

    @rouftop: Shredders are more fun to use on those checks.

  13. faustess says:

    This is much more important than we (as adults) realize! As a teenager, I had some idea – probably from my parents – about how credit cards worked. I was explaining credit cards and debit cards to my sister-in-law (she’s 17 & will be 18 soon) & was shocked that she had NO idea at all about how credit cards and debit cards worked. Hopefully my explanation was clear.