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Credit Tips for Students and Teens
Do You Really Need a Credit Card?
When it comes to credit tips for teens and students, the first question that arises whether you truly need a credit card.
Are you currently in a position where a credit card would produce a tangible advantage over saving your earnings and working to earn the money you need to support your lifestyle? If your answer is “Yes, I do believe a credit card would benefit me,” then take a few minutes to read on. Perhaps you’ll reconsider.
Understanding Interest Rates
Credit cards are far from free. Every dollar you borrow comes with an added price — the interest rate. If you carry a balance on your card (you don’t pay it off in full each month), you’ll owe interest on that balance. If you don’t have a proven track record of good credit history, you’ll be paying a lot of interest! It’s basically the credit card company coming to you and saying, you borrowed money; pay it back; and now, pay for the privilege of borrowing money!
Minimum Payments Aren’t a Strategy
Hopefully you understand how credit card companies make money now. They charge interest. To sweeten the deal (for them), they allow a “minimum monthly payment.” This is a trap! Don’t pay just the minimum. This will allow the credit card company to essentially charge you more in interest payments, and it will take you much longer to pay off your balance just making those minimum payments each month. Don’t get stuck in a rut with debt!
The Impact of Credit Scores
There are lot of things that affect your credit score. As a teen or student, you may feel some pressure to “build your credit up.” The truth is, there are few barriers that you’ll experience around your credit score as a teen. If you need to make a major purchase, saving up is a great way to avoid the problem of credit cards. If you’re trying to actively establish credit history, a safe way to get started is with a secured deposit credit card. These don’t create a line of credit for you; they use your money that you deposit into the account to guarantee the card, and it spends like a credit card. With these you still have to pay back the balance one you charge something. It’s not a debit card.
If you have a credit card, never give out your number or lend your card or info to anyone else. Identity theft and credit card fraud are serious problems and can damage your credit and threaten your financial security. Always keep your information secure.
Work for Teens and Students
In today’s world of constant connection and young people being overscheduled with extracurricular activities, finding time for a job may seem daunting. However, finding work and maintaining a steady income is one of the rites of passage into adulthood. It’s much more satisfying to know that you can provide for your own needs with money you earned vs. being dependent on your family or your credit cards. Work is also a great opportunity to network with people you may not otherwise meet, and these connections could prove to be quite valuable. Holding down a job while you’re in school also helps prioritize time and can help you maintain structure once you go to college — it may seem like a lot, but you can do it.
Budgeting and Spending Tendencies
For many, moving away from home or getting that first credit card is a symbol of freedom. Debt, however, is not a symbol of freedom. The best way to get out of debt is to never get into debt in the first place.
There are plenty of tools that can help you manage your money and plan. Our easy budget calculator and student loan calculator are great places to start. By understanding how much money you’ve got coming in from your paycheck how much money you’ve got to pay on bills, you can best decide how much to save each month and how much is left over for other concerns.
If you’ve already gotten into a bad situation with credit, you’re not alone. At CreditGUARD, we can help you get back on track with our nonprofit credit counseling and debt management programs. Call CreditGUARD Today today to learn more!