As the next generation grows up and begins to make their mark on the world, there is a lot that they need to know about their spending habits.
Specifically, the kids of today need to know how to properly handle credit cards so good spending habits are created.
Here are 10 lessons to consider teaching your children about credit cards today.
#1. Credit Isn’t Free Money
One of the most important lessons to learn is that credit isn’t actually money. It isn’t something to use for spending in addition to income that is being earned. It is something that can provide a level of protection in case an emergency happens.
#2. High APRs Aren’t a Good Thing
Having a high credit line might be a tempting thing for a credit card, but it means nothing with a high APR. Even a small balance of just $2,000 could take over 30 years to pay off just by paying the minimum amount due each month.
#3. Pay the Bill Every Month
Credit cards are a great way to establish credit, especially for students and those new to the credit market. On time payments can help to create a good reputation and a high credit score. Not paying the bill each month, however, will have the opposite effect.
#4. Look For Rewards
Having a line of credit today should come with some perks. Rewards cards are everywhere and when managed responsibly they can provide additional value. Movie tickets, cash back, sports memorabilia, and travel rewards are just a few of the typical rewards.
#5. Try To Use Your Card a Little Each Month
Having an empty line of credit that is never used does about the same thing as a maxed out credit card – it hurts your credit. Even if you just use an open line of credit for one cup of coffee per month, the payments will help to establish good credit.
#6. Don’t Close an Account
The age of a line of credit can have a positive impact on a credit score. The longer an open account ages, the better the impact. Closing a credit card, however, can actually have a negative impact on a credit score.
#7. Don’t Allow Others To Have Access
It might seem cool to let a buddy have access to your line of credit, but that can go wrong very quickly. Unless your kid marries early and wants their spouse to have a card, limit who has access to the account and keep it to yourself.
#8. Secured Cards Could Be Better Than Co-Signing
When there is no credit history, a first credit card can be difficult to get. For many parents, this means co-signing on a new credit card to use their own credit. Instead of putting your credit at risk, Mom and Dad, why not help with a deposit on a secured credit card? This will help Junior establish good credit and the kids won’t have to keep begging for cash in an emergency.
#9. Leave the Credit Card At Home
Unless you’re planning on using it, don’t take the credit card with you. It’s too tempting sometimes to buy something with it if you have plenty of credit, but not plenty of money.
#10. Keep Your Information Safe
Many credit card strips can be read by an RFID reader, especially the PayPass or Wave and Go cards. Keep your credit cards in metal containers or metal-lined wallets or purses to prevent this from happening and your information… and credit will remain safe.