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More and more students and teenagers across the
country are getting credit cards. New offers are frequently being
offered because students are a growing segment of the market, and credit
card companies know that they have money to spend. If you have a teenage
child, do not be surprised if they are being inundated with offers of
credit card deals. Credit cards are easy to get hold of even at the age
of sixteen or seventeen, but the interest rates are normally higher than
most credit cards, as are the fees (for late payments etc.), and the
credit limits lower. The reason that companies offer so many types of
credit cards to students is that they know that most of the time, the
students have parents who will be able to guarantee against the student
going into too much debt, and pay off the credit card bill if need be.
One very important thing to remember if you decide to allow your child
to have a credit card, is to try any get them to use it in emergency
situations only (this does not include an 'emergency' kebab at the end
of the night!). If they use the card frequently, they will be paying a
high premium for everyday purchases, risk the chance of getting into bad
debt at an early age, and get into mad finance managing habits.
Something you may wish to consider to avoid running up high credit card
bills is to put a voluntary limit on the card. If the card is intended
to be there for emergencies only, there is no point having thousands of
pounds potential credit as a continuous temptation.
An advantage to having a credit card at an early age is that, if used
sensibly, it can be a solid stepping stone towards a good credit
history. Likewise, misused cards can lead to a poor credit rating that
may take years to erase.
One way to make sure that bad credit rating is avoided is to opt for a
secured card. This is where the card-holder puts money into the bank for
security, and should they fail to meet repayments, this will be covered
by money in the bank. The credit limit will therefore be determined by
how much money is stored in the bank as collateral.
Although children under the age of eighteen should not be able to
receive a credit card without a parent's consent, there are numerous
anecdotal cases of this happening. Try and have open discussions with
your children about their finances without being too strict with them.
Remind them that they will probably be able to get a better credit deal
if they allow you to be a guarantor on their card.
A credit card makes it easy to buy something now and pay for it later.
It's much safer to use a credit card than to carry around cash. If you
lose your credit card, you can ask your credit card company to cancel
your card, and no one else can use it. But if you lose cash, your money
is gone. Credit cards are also convenient. You can use them to make
hotel, car rental and other reservations. You can buy items over the
phone or online. You can also use credit cards for emergencies, like
unexpected car repairs, when you don't have the cash to cover the
expenses. |
