What Teens Need to Know About Credit Cards

Fri, 27 Jan 2012

Credit cards are awesome, right? Maybe. This article will explain the basics about credit cards - what they are, how they should be used, that credit is not free money, it is borrowed money, what APR is and what can happen if you fall behind. Here are some common questions:  

How do I get a credit card?

To get a credit card on your own, you must be at least 18. You can sign-up on your college campus or apply at your bank or online.  

What do I look for when applying for a credit card?

Look for a card with a low annual percentage rate (APR) with no annual fee. Read the fine print before you sign up to make sure you can handle the terms. Offers that come with a free T-shirt might not be the best card for you.   Always remember, if it sounds too good to be true, it probably is.  

How do I handle my credit card?

  • Restrict cash advances. Interest rates are high.

  • Don’t overspend. If you can’t pay your bill, you will incur fees. In lieu of a credit card, consider an overdraft line of credit on your checking account.

  • Pay your bill in full every month. You will build great credit, which will help you later in life.

  • Stick with a few credit cards. Did you know experts say you should have no more than 3-4 credit cards?

  • Read the fine print. Terms can change at any time.

  • Report fraud, if it happens. Read your statements. If you see fraudulent charges, speak to the credit card company immediately.

What’s the difference between an unsecured credit card and a secured credit card?

Whether you qualify for a secured or unsecured credit card will depend on your overall credit history. A secured card may require a deposit which will be used as collateral versus an unsecured card which may not. Secured credit cards may also have monthly fees and higher interest rates associated with them. If you are looking to establish or reestablish your credit you want to make the best decision to fit your needs.  

Things to consider

  • Choose the card that is right for you

  • Ask yourself, “Do I really need this or do I simply want this?”

  • Credit cards require a great amount of responsibility - are you prepared?

  • Always make more than the minimum monthly payment to reduce debt faster

  • Late payments can damage your credit

  • You have to pay back what you spend

  • Protect your credit cards from others

  • Never allow others to use your credit card or have access to your credit card number

Do you have any questions about credit cards? We’d love to help answer them.