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Teenagers and Credit Cards

If you have a teenage son or daughter, you can be sure they are getting offers for credit cards. And while we all know how important having a credit card is in case of an emergency, it is just as important to make sure your child understands the responsibilities having a credit card brings. So take a few moments to talk to your children before they sign on the dotted line. Make sure they are aware of:

  • The annual percentage rate.
  • What is the grace period?
  • If you are late, how much is the late fee?
  • What happens if you go over the limit?
  • How is the minimum payment figured?

Then you need to set the ground rules. How is this card going to be used—for emergencies only, gas, or for all general purchases? What is their spending limit? Who is going to pay the bill—will you each contribute and if so, what percentage? Where will the child’s money come from—summer job or after school job? And if the latter, how will this affect studying, homework, or participating in after school activities?

Most importantly, make sure your child fully understands that his payment history on this card and all future credit extensions will directly impact their credit report. Impress upon them the need to keep their credit score as high as possible, not only to help obtain additional credit when they need it, but to obtain the most favorable interest rates possible. Besides affecting their credit, they also should be made aware that their credit report can impact many other facets of their life; for instance their ability to get a job, get into college, get housing, or enter and remain in the Armed Forces. So before they assume the responsibility of accepting a credit card, make sure they fully realize the need to treat it with the utmost respect and are aware that, whether good or bad, their credit history will have a major affect on many areas of their adult life.

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