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.    

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4 comment(s).

Natalie
January 30, 2012 at 7:01 pm
This article is very helpful to teens and adults. Most adults today are trying to reestablish their credit. For someone trying to restore and build their credit be obtaining a secure credit card, what would be a decent Interest Rate? Some of these secure credit cards are outrageous with the annual and monthly fees...the fees add up to being amount given to you on the credit card.
Leslie Montano
February 6, 2012 at 9:13 am
Unfortunately, in many cases, you are correct about fees and interest rates on secured cards but there is a reason. These cards are only for people who have either no credit history to base a decision on or they are for people who have defaulted in the past on loans they have had. This means that lending to them is very risky. More risk equals higher interest. It's that simple. The good news is these cards will convert to an unsecured card in anywhere from 12 to 24 months if you make all your payments on time (on or before the due date) and pay at least the minimum due. Interest rates may drop or with a positive history you can shop around for a lower interest rate card. If you believe this product is what you need then shop around with established financial institutions and go with the one that has the lowest rate, fee and converts to an unsecured card by 24 months.
Crislane
March 12, 2012 at 9:38 pm
If you're concerned with interest rates and have more than one credit cards, use the one with the lowest APR (rate). Cash advance fees vary from card to card. Interest is usually accrued daily from the moment a cash advance is taken out. There's no grace period for cash advances that I'm aware of. Therefore, it's best to pay it off or down as soon as possible to avoid charges. If you worry about your credit score, use the card with the highest available limit to avoid dinging your score due to high utilization. Keep balance to available credit under 30%, if possible. This can be achieved by spreading the advance over 2-3 cards.
March 13, 2012 at 2:11 am
Derogatory items age off your credit rreopt 7-1/2 years from the date of first deficiency (default). The older the item, the less impact on your score.You need at least 24 months of consistent, on time payment history to improve your score. If you don't have an open, active line of credit, get a credit card, even if you have to get a secured card. Use the card, wait for the statement, and pay the balance in full every month. In about a year, you should be able to get a regular credit card.If you recently defaulted on that credit card, it would probably be a good idea to negotiate a settlement with the collection agency. You might be able to settle for 50% to 75% in a lump sum. Get any settlement agreement in writing and don't give the collector direct access to your bank account. Many credit card companies and the collection agencies who buy defaulted credit card debt are going to court to collect.